Exercise 10-10 - EXERCISE 10-10 Situation I. $80,000The...

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EXERCISE 10-10 Situation I. $80,000—The requirement is the amount Oksana Baiul should report as capitalized interest at 12/31/07. The amount of interest eligible for capitalization is Weighted-Average Accumulated Expenditures X Interest Rate = Avoidable Interest Since Oksana Baiul has outstanding debt incurred specifically for the construction project, in an amount greater than the weighted-average accumulated expenditures of $800,000, the interest rate of 10% is used for capitalization purposes. Therefore, the avoidable interest is $80,000, which is less than the actual interest. $800,000 X .10 = $80,000 Finally, per FASB Statement No. 62, the interest earned of $250,000 is irrelevant to the question addressed in this problem because such interest earned on the unexpended portion of the loan is not to be offset against the amount eligible for capitalization. Situation II. $39,000—The requirement is total interest costs to be capitalized. FASB Statement No. 34 identifies assets which qualify for
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This note was uploaded on 06/06/2010 for the course ACCOUNTING ac505 taught by Professor Khan during the Spring '10 term at DeVry Fremont.

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Exercise 10-10 - EXERCISE 10-10 Situation I. $80,000The...

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