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3 - Page3 1.OnJanuary1,2009,DavidsonCo.....

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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 1’09 – 300000 Interest rate  - 10% Capitalized – 30000 Expenditure on Sep1’09 – 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  ago.
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