3 - Page 3 1. On January 1, 2009, Davidson Co. began...

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Unformatted text preview: Page 3 1. On January 1, 2009, Davidson Co. began construction of a new warehouse. The building was finished and ready for use on September 30, 2010. Expenditures on the project were as follows: January 1, 2009 $300,000 September 1, 2009 450,000 December 31, 2009 450,000 March 31, 2010 450,000 September 30, 2010 300,000 Davidson borrowed $300,000 of specific construction debt at 10% on January 1, 2009 and had $5,000,000 in 12% bonds outstanding through both years. Davidson's interest to be capitalized to the asset in 2009 should be: (Points : 7) Expenditure on Jan 109 300000 Interest rate - 10% Capitalized 30000 Expenditure on Sep109 450000 Interest rate 12% Capitalized for 4 months 450000*12%*4/12 - 18000 Interest to be capitalized during 2009 30000 + 18000 = 48000 2. On March 1, Paine Co. began construction of a small building. The following expenditures were incurred for construction: March 1 $75,000 April 1 74,000 May 1 180,000 June 1 270,000 July 1 100,000 The building was completed and occupied on July 1. To help pay for construction $50,000 was borrowed on March 1 at a 12%, three-year note payable. The only other debt outstanding during the year was a $500,000, 10% note issued two years 12%, three-year note payable....
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3 - Page 3 1. On January 1, 2009, Davidson Co. began...

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