File Tools View Assessment exam== - Compatibility Mode - X 1. Capitalization of interest. During 2017, Barden Building Company constructed various assets at a total cost of $14,700,000. The weighted average accumulated expenditures on assets qualifying for capitalization of interest during 2017 were $9,800,000. The company had the following debt outstanding at December 31, 2017: 1. 10%, 5-year note to finance construction of various assets, dated January 1, 2017, with interest payable annually on January $6,300,000 12%, ten-year bonds issued at par on December 31, 2011, with interest payable annually on December 31 9%, 3-year note payable, dated January 1, 2016, with interest payable 7,000,000 annually on January 1 3,500,000 Instructions Compute the amounts of each of the following (show computations). 1. Avoidable interest. 2. Total interest to be capitalized during 2017. Page 1 of 3 Display Settings D Focus e 157% 1 Type here to search - - + 2:59 PM ^ a la 1 4/26/2020 B3 File Tools View Assessment exam== - Compatibility Mode - 0 x Dividends on preferred stock. It is assumed that the corporation has $800,000 of 5% preferred stock and $3,200,000 of common stock outstanding, each having a par value of $10. No dividends have been declared for 2016 and 2017. (a) As of 12/31/18, it is desired to distribute $250,000 in dividends. How much will the preferred stockholders receive if their stock is cumulative? ========================== ======== 3. Bond issue price and premium amortization. On January 1, 2018, Piper Co. issued ten-year bonds with a face value of $4,000,000 and a stated interest rate of 10%, payable semiannually on June 30 and December 31. The bonds were sold to yield 12%. Table values are: Present value of 1 for 10 periods at 10% .386 Present value of 1 for 10 periods at 12% .322 Present value of 1 for 20 periods at 5% .377 Present value of 1 for 20 periods at 6% .312 Present value of annuity for 10 periods at 10% 6.145 Present value of annuity for 10 periods at 12% 5.650 Present value of annuity for 20 periods at 5% 12.462 Present value of annuity for 20 periods at 6% 11.470 Instructions (a) Calculate the issue price of the bonds. (b) Without prejudice to your solution in part (a), assume that the issue price was $3,542,000. Prepare the amortization table for 2018, assuming that amortization is recorded on interest payment dates using the effective-interest method. Display Settings C Focus Page 2 of 3 L - - + 127% 1 Type here to search 3:00 PM ^ ' l 1 4/26/2020
