Problem 1
During 2017, Barden Building Company constructed various assets at a total cost of $12,600,000. The weighted average accumulated expenditures on assets qualifying for capitalization of interest during 2017 were $8,918,000. The company had the following debt outstanding at December 31, 2017:
| 1. |
10%, 5-year note to finance construction of various assets, dated January 1, 2017, with interest payable annually on January 1 |
$5,308,000 |
| 2. |
12%, ten-year bonds issued at par on December 31, 2011, with interest payable annually on December 31 |
5,830,000 |
| 3. |
9%, 3-year note payable, dated January 1, 2016, with interest payable annually on January 1 |
2,915,000
|
I caluculated weighted average interest by using 1, 2, and 3. But the anwer says 1 is specific loan.
How can I tell 1 is spefic loan and different from 2 and 3.
Problem 2: A machine cost $900,000 on April 1, 2017. Its estimated salvage value is $90,000 and its expected life is eight years.
Calculate the depreciation expense by straight-line for 2017.
Depreciation expense... 75,938
Calculate the depreciation expense by double-declining balance for 2018
Depreciation expense... 182, 813
Calculate the depreciation expense by sum-of-the-years'-digits for 2018
Depreciation expense...163,125
Which method would result in the smallest income amount for 2018?