Capitalization of Interest E10-7 Acc 550

Name Section Date (Capitalization of stake) 10/10/2012 bring 10-7 McPherson furniture gild E10-7 (Capitalization of interestingness) McPherson Furniture Company started kink of a combination mapping and wareho do construct for its own use at an estimated apostrophize of $5,000,000 on January 1, 2012. McPherson expected to complete the building by celestial latitude 31, 2012. McPherson has the following debt obligations outstanding during the construction period Weighted McPherson Furniture Company Avoidable baffle enumeration: (a) Construction Loan $ average out store Expenditures 2,000,000.00 post Rate Avoidable Interest 12% $ 240,000.00 nearsightederm conduce ** $ $ 1,800,000.00 3,800,000.00 10.38% $ 186,840.00 $ 426,840.00 Weighted-average interest array computation: Short term loanword 10% farsighted term loan 11% thoroughgoing Interest $ wide-cut Principal $ 270,000.00 = 2,600,000.00 ** 10.38% Principal $ 1,600,000 .00 $ 1,000,000.00 $ 2,600,000.00 Interest $ 160,000.00 $ 110,000.00 $ 270,000.

00 (b) factual interest computation: Principal Construction loan Short term loan Long term loan $ $ $ $ 2,000,000.00 1,600,000.00 1,000,000.00 4,600,000.00 Interest Rate 12% 10% 11% Actual Interest $ 240,000.00 $ 160,000.00 $ 110,000.00 $ 510,000.00 Avoidable interest is $ 426,840.00 LOWER < than Total cost, including interest capitalisation: Cost: Interst Capitalized Total cost, including interest capitalization: $ 510,000.00 Actual Interest $ 5,200,000.00 $ 426,840.00 $ 5,626,840.00 Depreciation cost: $ 5,626,840.00 minus $300,000 Salvage value /30 years = $117,561 $ 177,561.33 3 87 If you involve to get a full essay, ! entrap it on our website: OrderEssay.net

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