During 2012, Barden Building Company constructed various assets at a total cost of $10,500,000. The weighted average accumulated expenditures on assets qualifying for capitalization of interest during 2012 were $7,000,000. The company had the following debt outstanding at
December 31, 2012:
1. 10%, 5-year note to finance construction of various assets,
dated January 1, 2012, with interest payable annually on January 1 $4,500,000
2. 12%, ten-year bonds issued at par on December 31, 2006, with interest
payable annually on December 31 5,000,000
3. 9%, 3-year note payable, dated January 1, 2011, with interest payable
annually on January 1 2,500,000
Instructions
Compute the amounts of each of the following (show computations).
1. Avoidable interest.
2. Total interest to be capitalized during 2012