Question Details

What amount of interest should be charged 


Use the following information to answer questions 1 - 5.

Arlington Company is constructing a building. Construction began on January 1 and was completed on December 31. Expenditures were $2,400,000 on March 1, $1,980,000 on June 1, and $3,000,000 on December 31. Arlington Company borrowed $1,200,000 on January 1 on a 5-year, 12% note to help finance construction of the building. In addition, the company had outstanding all year a 10%, 3-year, $2,400,000 note payable and an 11%, 4-year, $4,500,000 note payable.

	1.	What are the weighted-average accumulated expenditures?
a.	$4,380,000
b.	$3,155,000
c.	$7,380,000
d.	$3,690,000

	2.	What is the weighted-average interest rate used for interest capitalization purposes?
a.	11%
b.	10.85%
c.	10.5%
d.	10.65%

 
	3.	What is the avoidable interest for Arlington Company?
a.	$144,000
b.	$463,808
c.	$164,281
d.	$352,208

	4.	What is the actual interest for Arlington Company?
a.	$879,000
b.	$891,000
c.	$735,000
d.	$352,208

	5.	What amount of interest should be charged to expense?
a.	$382,792
b.	$735,000
c.	$526,792
d.	$415,192



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