Huffman corporation construct a building at cost of $20 million. Average accumul

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Huffman corporation construct a building at cost of $20 million. Average accumulated expenditures were $8 million, actual interest was $1,200,000, and avoidable interest was $100,000. If the salvage value is $1,600,000, and it useful life is 40 years, depreciation expense for the first full year using the straight-line method is?

Use following info for next questions: On March 1, 2012 newton company purchased land for an office site by paying $900,000 cash. Began construction on the office building on March 1. The following expenditures were incurred for construction: March 1, 2012 $600,000 April 1, 2012 $840,000 May 1, 2012 $1,500,000 June 1 2012 $2,400,000
The office was completed and ready for occupancy on July 1 to help pay for construction, $1,200,000 was borrowed one March 1, 2012 when a 9%, three year note payable. Other than the construction note, the only debt outstanding during 2012 was a $500,000, 12%, six-year note payable dated January 1, 2012. The weighted average accumulated expenditures on the construction project during 2012 were A) $640,000 B) $4,890,000 C) $520,000 D) $1,160,000 Assume the weighted average accumulated expenditures for the construction project are $870,000. The amount of interest cost to be capitalized during 2012 is A) $130,500 B) $138,000 C) $150,000 D) $168,000
Huffman corporation construct a building at cost of $20 million. Average accumulated expenditures were $8 million, actual interest was $1,200,000, and avoidable interest was $100,000. If the salvage value is $1,600,000, and it useful life is 40 years, depreciation expense for the first full year using the straight-line method is?

Use following info for next questions: On March 1, 2012 newton company purchased land for an office site by paying $900,000 cash. Began construction on the office building on March 1. The following expenditures were incurred for construction: March 1, 2012 $600,000 April 1, 2012 $840,000 May 1, 2012 $1,500,000 June 1 2012 $2,400,000
The office was completed and ready for occupancy on July 1 to help pay for construction, $1,200,000 was borrowed one March 1, 2012 when a 9%, three year note payable. Other than the construction note, the only debt outstanding during 2012 was a $500,000, 12%, six-year note payable dated January 1, 2012. The weighted average accumulated expenditures on the construction project during 2012 were A) $640,000 B) $4,890,000 C) $520,000 D) $1,160,000 Assume the weighted average accumulated expenditures for the construction project are $870,000. The amount of interest cost to be capitalized during 2012 is A) $130,500 B) $138,000 C) $150,000 D) $168,000


Use following info for next questions: On March 1, 2012 newton company purchased land for an office site by paying $900,000 cash. Began construction on the office building on March 1. The following expenditures were incurred for construction: March 1, 2012 $600,000 April 1, 2012 $840,000 May 1, 2012 $1,500,000 June 1 2012 $2,400,000
The office was completed and ready for occupancy on July 1 to help pay for construction, $1,200,000 was borrowed one March 1, 2012 when a 9%, three year note payable. Other than the construction note, the only debt outstanding during 2012 was a $500,000, 12%, six-year note payable dated January 1, 2012. The office was completed and ready for occupancy on July 1 to help pay for construction, $1,200,000 was borrowed one March 1, 2012 when a 9%, three year note payable. Other than the construction note, the only debt outstanding during 2012 was a $500,000, 12%, six-year note payable dated January 1, 2012. The weighted average accumulated expenditures on the construction project during 2012 were A) $640,000 B) $4,890,000 C) $520,000 D) $1,160,000 Assume the weighted average accumulated expenditures for the construction project are $870,000. The amount of interest cost to be capitalized during 2012 is A) $130,500 B) $138,000 C) $150,000 D) $168,000

Explanation / Answer

Depreciation under straight line method:

= (Asset cost+Avoidable interest-Salvage value)÷Useful life

= ($20 million+$100,000-$1,600,000)÷40

= $462,500

Note: In this case, Avoidable interest was lesser, hence it is considered. Else actual interest would be considered.

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