(a) On December 31, 2013, Main Inc. borrowed $3,450,000 at 13% payable annually
ID: 2473699 • Letter: #
Question
(a)
On December 31, 2013, Main Inc. borrowed $3,450,000 at 13% payable annually to finance the construction of a new building. In 2014, the company made the following expenditures related to this building: March 1, $414,000; June 1, $690,000; July 1, $1,725,000; December 1, $1,725,000. The building was completed in February 2015. Additional information is provided as follows.1. Other debt outstanding 10-year, 12% bond, December 31, 2007, interest payable annually $4,600,000 6-year, 11% note, dated December 31, 2011, interest payable annually $1,840,000 2. March 1, 2014, expenditure included land costs of $172,500 3. Interest revenue earned in 2014 $56,350
Explanation / Answer
Answer:(a) the amount of interest is $227987.5
Expenditures, 2014 Average investment 1-Mar 414000 10/12 345000 1-Jun 690000 7/12 402500 1-Jul 1725000 6/12 862500 1-Dec 1725000 1/12 143750 1753750 Loans: Issued: Actual interest cost 13% to finance construction 3450000 12/31/2013 448500 12% Bonds 4600000 years ago 552000 11% Bond 1840000 years ago 202400 1202900 Average investment Avoidable interest cost 1753750 13% 227987.5 227987.5Related Questions
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