Question

Liddy Corp. began constructing a new warehouse for its operations during the current year. In the year Liddy incurred interest of $10,000 on a working capital loan, and interest on a construction loan for the warehouse of $70,000. Interest computed on the average accumulated expenditures for the warehouse construction was $60,000. What amount of interest should Liddy expense for the year

Answer 1

Answer: $20,000

Explanation:

From the question, we are told that Liddy Corp. began constructing a new warehouse for its operations in the current year and that Liddy incurred interest of $10,000 on a working capital loan, and an interest on a construction loan for a warehouse of $70,000. The interest that was computed on the average accumulated expenditures for the warehouse construction was $60,000.

To calculate the amount of interest that Liddy should expense for the year, we add the $10,000 Liddy interest that Liddy incurred on a working capital loan plus the interest on the construction loan for the warehouse of $70,000. We then subtract the expenditure of $60,000 from the value gotten. This will be:

= $10,000 + $70,000 - $60,000

= $20,000

The amount of interest should Liddy expense for the year is $20,000.

Answer 2

Answer:

$20,000

Explanation:

From the question above Liddy incurred an interest of $10,000 on a working capital loan

Liddy also incurred an interest of $70,000 on a construction loan

Therefore, the total amount of interest is calculated as the sum of both interest incurred.

Total amount of interest incurred= $10,000+ $70,000

= $80,000

Liddy accumulated an expenditure for the construction of the warehouse in the amount of $60,000

The amount of interest that should be expensed by Liddy for the year is calculated as follows

Total interest incurred-Expenditure

= $80,000-$60,000

= $20,000