During 2017, Atlanta Corporation constructed assets costing $4,000,000. The weig

Question

During 2017, Atlanta Corporation constructed assets costing $4,000,000. The weighted-average accumulated expenditures on these assets during 2017 was $2,400,000. To help pay for construction, $1,760,000 was borrowed at 10% on January 1, 2017, and funds not needed for construction were temporarily invested in short-term securities, yielding $36,000 in interest revenue. Other than the construction funds borrowed, the only other debt outstanding during the year was a $2,000,000, 10-year, 9% note payable dated January 1, 2011. What is the amount of interest that should be capitalized by Bass during 2017? Question 3 options:

$240,000

$120,000

$233,600

$377,600

Explanation / Answer

C.$233,600.

interest on specific borrowing towards construction @10% on $1,760,000 =>$176,000.

interest on remaining expenditure i.e ($2,400,000 - $1,760,000=> $640,000)@9%=>$57,600.

total interest to be capitalised = $176,000+$57,600 =>$233,600.

Related Questions

Navigate

• Browse (All)
• Browse D
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.