Question
Trump Company constructed various assets at a total cost of $8,400,000during 2019. The weighted average accumulated expenditures on assets qualifying for capitalization of interest during
Trump Company constructed various assets at a total cost of $8,400,000during 2019. The weighted average accumulated expenditures on assets qualifying for capitalization of interest during 2019were $5,600,000.
Trump had the following debts outstanding at December 31, 2019:
A.12%, ten-year bonds issued at par on December 31, 2013, with interest payable annually on December 31$4,000,000.
B.9%, 3-year note payable, dated January 1, 2018, with interest payable annually on January 1$2,000,000.
C.10%, 5-year note to finance construction of various assets, dated January 1, 2019, with interest payable annually on January 1$3,600,000.
Required:
Compute the amounts of each of the following. Show all workings.
i.Avoidable interest.8 marks
ii.Total interest to be capitalized during 2019.
Explain the rational for the decision.7marksTotal 15 marks
Show all workings
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