Question - Mardel corporation borrowed $300,000 at 10% interest from American bank on January 1, 2004, for the specific purpose of constructing a special purpose equipment to be used in its operations. Construction on the equipment began on January 1, 2004, and the following expenditures were prior to the projects completion on December 31, 2004

Expenditure made in 2004

January 1 $200,000

April 30 $300,000

November 1 $600,000

December 1 $300,000

Total expenditure $1,400,000

Other general debt existing on January 1, 2004 and issued in 2004 at par was $500,000, 14% 10-year bonds payable and $300,000 10% 5-year notes payable.

a. Does this asset qualify for interest capitalization? Why or why not? Give detailed explanation based n GAAP.

b. Compute the weighted average accumulated expenditure.

c. Compute the avoidable interest and actual interest. What interest is capitalized? Provide journal entry for interest capitalization.