Use the Following Information to Answer Questions

question 43

Multiple Choice

Use the following information to answer questions
Arlington Company is constructing a building.Construction began on January 1 and was completed on December 31.Expenditures were $2,400,000 on March 1, $1,980,000 on June 1, and $3,000,000 on December 31.Arlington Company borrowed $1,200,000 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, $2,400,000 note payable and an 11%, 4-year, $4,500,000 note payable.
-During 2011, Chan Company incurred average accumulated expenditures of HK$3,200,000 during construction of assets that qualified for capitalization of interest.The only debt outstanding during 2011 was a HK$5,000,000, 7.5%, 6-year note payable dated July 1, 2010.What is the amount of interest that should be capitalized by Chan during 2011?

• A)HK$0.
• B)HK$120,000.
• C)HK$240,000.
• D)HK$375,000.

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Definitions:

Salvage Value

The estimated resale value of an asset at the end of its useful life, typically considered in depreciation calculations.

Useful Life Estimate

The period over which a fixed asset is expected to be usable by a company, affecting depreciation calculations.

Retroactive Changes

Adjustments made to past financial statements, policies, or calculations to correct errors or align with new accounting standards.

Future Years

Refers to the period of time that lies ahead, used in planning, forecasting, or projecting financial and operational activities.