Final answer:
The interest capitalized for Thornton Industries for the years 2018 and 2019 can be calculated by combining the weighted average accumulated expenditures with the applicable interest rates on existing notes and bonds, pro-rated for construction dates and expenditures.
Step-by-step explanation:
To calculate the amount of interest capitalized for Thornton Industries for the years 2018 and 2019, we need to follow the specific guidance provided by accounting principles for the capitalization of interest as a part of the cost of a constructed asset. This includes applying the interest rates on the debt to the expenditures made for the asset's construction, for the period of construction. We assess the average accumulated expenditures for each period and apply the appropriate interest rates to determine the capitalizable interest.
The total weighted average accumulated expenditures for 2018 are found by adding the full amount for July 1, the three-quarters amount for September 30, and the one-quarter amount for November 30. For 2019, it will just be the January 30 amount since the project is completed on March 31, 2019.
First, calculate the interest for each debt separately and then combine them. As no new loans were taken, only the interest on the existing notes and bonds during the construction period will be capitalized. Therefore, no additional calculations for new loans are necessary.
For simplicity, let's assume a 360-day year for interest calculations:
Weighted average accumulated expenditures for 2018:
July 1 - December 31 (6 months): $680,000
September 30 - December 31 (3 months): $1,020,000 * 3/4
November 30 - December 31 (1 month): $1,020,000 * 1/4
Combined interest for 2018 using the interest rates of the notes and bonds applied to the respective weighted average accumulated expenditures.
Weighted average accumulated expenditures for 2019:
January 30 - March 31 (2 months): $960,000
Combined interest for 2019 using the interest rates of the notes and bonds applied to the January expenditure.