a. Compute the weighted average interest rate on the general debt. Calculation of weighted average interest rate Numerator + Denominator = Rate 0+ $ 0 = General Debt $ % b. Calculate avoidable interest for the purpose of interest capitalization.

Auditing: A Risk Based-Approach (MindTap Course List)
11th Edition
ISBN:9781337619455
Author:Karla M Johnstone, Audrey A. Gramling, Larry E. Rittenberg
Publisher:Karla M Johnstone, Audrey A. Gramling, Larry E. Rittenberg
Chapter13: Auditing Debt, Equity, And Long-term Liabilities Requiring Management Estimates
Section: Chapter Questions
Problem 1CYBK
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Weighted average accumulated expenditures are $400,000 on a project for which work steadily
progressed during the current year. The following debt was outstanding during the current
year.
Construction loan $100,000 at 10%
Note payable
$500,000 at 8%
Mortgage payable $150,000 at 12%
a. Compute the weighted average interest rate on the general debt.
Calculation of weighted average interest rate
Numerator Denominator =
Rate
General Debt $
Debt
Category
0
b. Calculate avoidable interest for the purpose of interest capitalization.
Note: Use the interest rate calculated above EXACTLY as shown in your calculations below.
. Note: Round dollar amounts to the nearest whole dollar.
Specific Debt $
General Debt
Calculation of Avoidable Interest
Weighted Average
$
$
Accumulated
Expenditures
0
0
0
Interest
Rate
Avoidable
0% $
0%
LA
$
Interest
%
0
0
0
Transcribed Image Text:Weighted average accumulated expenditures are $400,000 on a project for which work steadily progressed during the current year. The following debt was outstanding during the current year. Construction loan $100,000 at 10% Note payable $500,000 at 8% Mortgage payable $150,000 at 12% a. Compute the weighted average interest rate on the general debt. Calculation of weighted average interest rate Numerator Denominator = Rate General Debt $ Debt Category 0 b. Calculate avoidable interest for the purpose of interest capitalization. Note: Use the interest rate calculated above EXACTLY as shown in your calculations below. . Note: Round dollar amounts to the nearest whole dollar. Specific Debt $ General Debt Calculation of Avoidable Interest Weighted Average $ $ Accumulated Expenditures 0 0 0 Interest Rate Avoidable 0% $ 0% LA $ Interest % 0 0 0
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