Arlington Company is constructing a building. Construction began on January 1 and was completed on December 31. Expenditures wer
e $6,400,000 on March 1, $5,280,000 on June 1, and $8,000,000 on December 31. Arlington Company borrowed $3,200,000 on January 1 on a 5-year, 12% note to help finance construction of the building. In addition, the company had outstanding all year a 10%, 3-year, $6,400,000 note payable and an 11%, 4-year, $12,000,000 note payable.
A) What is the weighted-average interest rate used for interest capitalization purposes?
B) What is the avoidable interest for Arlington Company?
C) What is the actual interest for Arlington Company?
D) What amount of interest should be charged to expense?
A) What is the weighted-average interest rate used for interest capitalization purposes?
B) What is the avoidable interest for Arlington Company?
C) What is the actual interest for Arlington Company?
D) What amount of interest should be charged to expense?
1 answer:
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A business operates through certain actions that manage and keep the business alive. Such operating activities may include more than a couple of processes that help the business stay afloat.
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- Operating activities are important as they control the cash flow of the business and maybe the sole source of ensuring the business stays alive.
- It is directly linked to the deep-end workings of the company, like the production, sale, distribution, etc. of the company.
Thus, operating activities such as the determination of the incomes, purchase of merchandise, sale of goods and services, etc. all play a huge part in the successful running of the company. It's actions such as these that determine the success or failure of the company.
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