Questions -
Q1. On September 1, 2001, ABC Company purchased a building for $37,000 in cash. The building has an estimated 4 years useful life with salvage value of 1,000. ABC adapted sum-of-the-years'-digits depreciation method, compute the depreciation expense for his building in ABC's December 31, 2005 income statement?
1. 2,500
2. 1,500
3. 2,400
4. 2,000
5. 1,750
Q2. ABC Company, a calendar-year company, started construction of factory on January 1, 2007 that was planned to complete in three years. The amount of interest that could have been avoided if the construction had not started was $2,500, while the amount of actual interest that ABC actually incurred was $5,000 for the year ended December 31, 2007.
What amount of interest cost should ABC capitalize as of December 31, 2007?
1. $ 0
2. $2,000
3. $2,500
4. $3,800
5. $5,500