l workings. i. Avoidable interest. ii. Total interest to be capitalized during 2019. Explain the rationale for the decision.
Trump Company constructed various assets at a total cost of $8,400,000 during 2019. The weighted-average accumulated expenditures on assets qualifying for capitalization of interest during 2019 were $5,600,000.
Trump had the following debts outstanding at December 31, 2019:
A. 12%, ten-year bonds issued at par on December 31, 2013, with interest payable annually on December 31 $4,000,000
B. 9%, 3-year note payable, dated January 1, 2018, with interest payable annually on January 1 $2,000,000
C. 10%, 5-year note to finance the construction of various assets, dated January 1, 2019, with interest payable annually on January 1 $3,600,000
Required: Compute the amounts of each of the following. Show all workings.
i. Avoidable interest.
ii. Total interest to be capitalized during 2019. Explain the rationale for the decision.
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