On December 31, 2009, Hurston Inc. borrowed $3,000,000 at 12% payable annually t

Question

On December 31, 2009, Hurston Inc. borrowed $3,000,000 at 12% payable annually to finance the construction of a new building. In 2010, the company made the following expenditures related to this building: March 1, $360,000; June 1, $600,000; July 1, $1,500,000; December 1, $1,200,000. Additional information is provided as follows. Determine the amount of weighted average accumulated expenditure in 2010 in relation to the construction of the building. Determine the amount of interest to be capitalized in 2010 in relation to the construction of the building. Determine the total actual interest expenses incurred in year 2010. [ASSET IMPAIRMENT] On 12/31/09, the Stevens Co. had an asset with cost of $10,000 and accumulated depreciation of $6,000. Because of changes in technology, the auditor inquired as to the expected future cash flows from the asset. The Company responded that total estimated future cash flows attributable to the asset amounted to $3,000. On 12/31/09, the fair market value of the asset was $2,800. Is the asset impaired? What is the amount of loss due to impairment? [Depreciation Method] A machine was purchased on 1/1/09 for $80,000. Estimated residual value = $10,000. Estimated life = 20 years. Required: What is the amount of depreciation expense for the second year of the asset's life Under the Straight-line depreciation method.

Explanation / Answer

Date

Thus, Correct Answer is 14(a) $ 1,500,000.

1000

Thus,

17 (a) Yes

18 (c) 1,000

3500

Thus,

19(b) $ 3,500

20(b) $ 7,200

Date

Expenditure Period of investments (Months) Weighted Average Amount Workings March , 01 360,000 10 300,000 360000*10/12 June , 01 600,000 7 350,000 600000*7/12 July, 01 1,500,000 6 750,000 1500000*6/12 Dec-01 1,200,000 1 100,000 1200000*1/12 Total                                       1,500,000

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