Trump Company constructed various assets at a total cost of $8,400,000 during 2019. The weighted average accumulated expenditures on assets qualifying for capitalization of interest during 2019 were $5,600,000. Trump had the following debts outstanding at December 31, 2019: 2%, ten-year bonds issued at par on December 31, 2013, with interest payable annually on December 31 $4,000,000. 9%, 3-year note payable, dated January 1, 2018, with interest payable annually on January 1 $2,000,000. 10%, 5-year note to finance construction of various assets, dated January 1, 2019, with interest payable annually on January 1 $3,600,000 Required: Compute the amounts of each of the following. Show all workings. Avoidable interest. Total interest to be capitalized during 2019. Explain the rational for the decision.
Trump Company constructed various assets at a total cost of $8,400,000 during 2019. The weighted average accumulated expenditures on assets qualifying for capitalization of interest during 2019 were $5,600,000. Trump had the following debts outstanding at December 31, 2019: 2%, ten-year bonds issued at par on December 31, 2013, with interest payable annually on December 31 $4,000,000. 9%, 3-year note payable, dated January 1, 2018, with interest payable annually on January 1 $2,000,000. 10%, 5-year note to finance construction of various assets, dated January 1, 2019, with interest payable annually on January 1 $3,600,000 Required: Compute the amounts of each of the following. Show all workings. Avoidable interest. Total interest to be capitalized during 2019. Explain the rational for the decision.
Intermediate Accounting: Reporting And Analysis
3rd Edition
ISBN:9781337788281
Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Chapter13: Investments And Long-term Receivables
Section: Chapter Questions
Problem 1RE
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Trump Company constructed various assets at a total cost of $8,400,000 during 2019. The weighted average accumulated expenditures on assets qualifying for capitalization of interest during 2019 were $5,600,000. Trump had the following debts outstanding at December 31, 2019:
- 2%, ten-year bonds issued at par on December 31, 2013, with interest payable annually on December 31 $4,000,000.
- 9%, 3-year note payable, dated January 1, 2018, with interest payable annually on January 1 $2,000,000.
- 10%, 5-year note to finance construction of various assets, dated January 1, 2019, with interest payable annually on January 1 $3,600,000
Required:
Compute the amounts of each of the following. Show all workings.
- Avoidable interest.
- Total interest to be capitalized during 2019. Explain the rational for the decision.
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