nishvik
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Joined: 01 Aug 2010
Location: United States
Online Status: Offline
Posts: 56
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| Posted: 12 Jul 2012 at 15:58 | IP Logged
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At the beginning of the year, Cann Co. started
construction on a new $2 million addition to its plant.
Total
construction expenditures made during the year were
$200,000 on January 2, $600,000 on May 1, and
$300,000 on December 1. On January 2, the company
borrowed $500,000 for the construction at 12%.
The only other outstanding debt the company had was a 10%
interest rate, long-term mortgage of
$800,000, which had been outstanding the entire year.
What amount of interest should Cann capitalize
as part of the cost of the plant addition?
a. $140,000
b. $132,000
c. $72,500
d. $60,000
Explanation
Choice "c" is correct.
CAN SOMEONE PLEASE EXPLAIN THIS WITH CALCULATION??
HELP WOULD BE REALLY REALLY APPRECIATED...
__________________
Thank you
Nishvik
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Topic: Capitalization Of Intrest Cost...Help
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