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Basic Question 7 of 12
Ashley Corporation constructed an office building for its own use. During 2015, the average accumulated expenditure for construction was $4,000,000. At the end of 2010, Ashley had borrowed $1,000,000 specifically for the construction costs. The interest on the construction loan was 11%. The only other debt was $10,000,000 debentures (outstanding all of 2015), with an interest rate of 8%. How much is the total interest to be paid in 2015?
B. $800,000
C. $910,000
A. $110,000
B. $800,000
C. $910,000
User Contributed Comments 10
| User | Comment |
|---|---|
| uberstyle | note total interest, not interest attributable to construction |
| kutta2102 | Darn nearly tricked me! |
| viannie | it's how much we need to pay for interest ... not how much interests is attributed to the construction ;( |
| rfvo | has nothing to do with capitalization |
| Paulvw | There I was thinking of uncapitalized interest... <:( |
| arudkov | TOTAL(( they got me. |
| investoprenuer | What's this question trying to teach? |
| safash | teaching us to be alert |
| johntan1979 | A little off topic, I would say, this question. Perhaps something more beneficial and related to the current topic would be nice. |
| robertdole | The questions are formulaic. Identifying the subject (interest) and trigger (paid in 2011) makes breaking them down more palpable. |
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Tamara Schultz
Learning Outcome Statements
describe general principles of expense recognition, specific expense recognition applications, implications of expense recognition choices for financial analysis and contrast costs that are capitalized versus those that are expensed in the period in which they are incurred
CFA® 2024 Level I Curriculum, Volume 2, Module 2.