7. A building was constructed last year for Agro Co. for use as a production facility. Construction began on January 1 and was completed on December 31. The payments to the contractor were as follows. Date Payment 1/1 $600,000 3/31 700,000 9/30 1,000,000 11/1 800,000 To finance construction of the building, a $1,500,000, 12% construction loan was taken out on January 1. The loan was repaid on December 31. The firm had two sources of general debt: $800,000 note payable, 8% annual interest, and $1,200,000 par value bonds, 10% annual interest. Determine the amount of interest to be capitalized
7. A building was constructed last year for Agro Co. for use as a production facility. Construction began on January 1 and was completed on December 31. The payments to the contractor were as follows. Date Payment 1/1 $600,000 3/31 700,000 9/30 1,000,000 11/1 800,000 To finance construction of the building, a $1,500,000, 12% construction loan was taken out on January 1. The loan was repaid on December 31. The firm had two sources of general debt: $800,000 note payable, 8% annual interest, and $1,200,000 par value bonds, 10% annual interest. Determine the amount of interest to be capitalized
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:7.
A building was constructed last year for Agro Co. for use as a production facility.
Construction began on January 1 and was completed on December 31. The payments to the contractor
were as follows.
Date
Payment
1/1
$600,000
3/31
700,000
9/30 1,000,000
11/1
800,000
To finance construction of the building, a $1,500,000, 12% construction loan was taken out on January 1.
The loan was repaid on December 31. The firm had two sources of general debt: $800,000 note payable,
8% annual interest, and $1,200,000 par value bonds, 10% annual interest.
Determine the amount of interest to be capitalized
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