Question 11 Int Cap] Which of the following assets do not qualify for interest c

Question

Question 11 Int Cap] Which of the following assets do not qualify for interest capitalization? A.A new building that is under construction and intended for use by the company B.A new building that was purchased ready for use by the company. C. A new building that a company is building and intends to sell for a profit. D. All of the above. Question 12 The accountant for the Stevens Co. needs to make a journal entry to capitalize interest costs during construction of an expensive piece of equipment. Avoidable interest costs were calculated as $60,000 and actual interest costs were calculated as $180,000. Which of the following journal entries is correct: A Interest expense 180,000 Cash or interest payable 180,000 Interest expense 60,000 Cash or interest payable 60,000 120,000 nterest expense Equipment 60,000 Cash or interest payable 180,000 Interest expense Equipment 60,000 120,000 Cash or interest payable 180,000

Explanation / Answer

Question 11 - correct answer is option C as the bulding is intended to sell at profit and is not for business use

q 12)

correct option is A

as the actual interest expense is 180,000

Q13

option A is correct as the actual interest expense is 12,000

Q14)

Option A is correct ( Expenses for all three years/3) = 300,000/3 = 100,000

Q15)

Option A is corrcet $ 10,000 (120,000 - 20,000)/10

Q16)

Correct answer is option D) 24,000

120,000/10 = 12,000

12000*2 = 24,000

To calculate depreciation under the double declining method, multiply the book value at the beginning of the fiscal year by a multiple of the straight-line rate of depreciation. The double declining balance formula is:

Double-declining balance (ceases when the book value = the estimated salvage value)

2 × Straight-line depreciation rate × Book value at the beginning of the year

Q17)

Correct option is $ 19,200

opening book value = 120,000 - 24,000 = 96,000

=96000*10% = 9600

9600 * 2 = 19200

Q18)

Option c is correct answer ( beginning + purchases - sales)

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