On January 1, 2013, Kendall Inc. began construction of an automated cattle feede
ID: 2361021 • Letter: O
Question
On January 1, 2013, Kendall Inc. began construction of an automated cattle feeder system. The system was finished and ready for use on September 30, 2014. Expenditures on the project were as follows: Jan 1 2013 $200,000 September 1 2013 $300,000 Dec 31, 2013 $300,000 March 31, 2014 $300,000 September 30, 2014 $200,000 Kendall borrowed $750,000 on a construction loan at 12% interest on Jan 1 2013. This loan was outstanding throughout the construction period. The company had $4,500,000 in 9% bonds payable outstanding in 2013 and 2014. PLS SHOW WORK Calculate the following: 3 Interest expense for 2013 was: 6) Interest expense for 2014 wasExplanation / Answer
Average accumulated expenditures for 2000 was:
A) $300,000.
B) $350,000.
C) $500,000.
D) $400,000.
Rationale:
January 3, 2000
$200,000
x 12/12
=
$200,000
September 1, 2000
300,000
x 4/12
=
100,000
December 31, 2000
300,000
x 0/12
=
0
$800,000
=
$300,000
=================
= Interest capitalized for 2000 was:
A) $48,000.
B) $42,000.
C) $60,000.
D) $36,000.
Rationale:
$300,000 (determined above) x 12% = $36,000
==========
Average accumulated expenditures for 2001 by the end of the construction period was:
A) $1,300,000.
B) $1,236,000.
C) $1,200,000.
D) $1,036,000.
Accumulated expenditures at 1/1/01
(determined above)
$ 836,000
x 9/9
=
$ 836,000
March 31, 2001
300,000
x 6/9
=
200,000
September 30,2001
200,000
x 0/9
=
0
$1,336,000
$1,036,000
======
Interest capitalized for 2001 was:
A) $104,625.
B) $86,805
C) $97,875.
D) $67,500.
Rationale:
Total
$1,036,000
(determined above)
Specific borrowing
750,000
x 12% x 9/12
$67,500
Excess
286,000
x 9% x 9/12
19,305
Capitalized interest
$86,805
January 3, 2000
$200,000
x 12/12
=
$200,000
September 1, 2000
300,000
x 4/12
=
100,000
December 31, 2000
300,000
x 0/12
=
0
$800,000
=
$300,000
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