Alliance Company Limited is constructing a Plant that is financed with $10 million of debt, 8...

Transcribed Image Text:

Alliance Company Limited is constructing a Plant that is financed with $10 million of debt, 8 million of which is a construction loan specifically for the construction of the plant. The rest of the construction is financed out of the general pool of debt of the company. The company will use the plant to manufacture a line of new products. The debt structure of the firm is as follows: Construction loan @ 12% Long term debenture @ 7% 10-year 10% Note LA construction. $ 8 000 000 12 000 000 5 000 000 The debentures and the 10-year 10% note were issued at the same time. (1) Compute the amount of interest payable during the year (3 marks) (ii) Determine the amount of interest cost to be capitalized to the plant under (6 marks) (ii) What amount of interest should be reported on the statement of comprehensive income? (2 marks) Alliance Company Limited is constructing a Plant that is financed with $10 million of debt, 8 million of which is a construction loan specifically for the construction of the plant. The rest of the construction is financed out of the general pool of debt of the company. The company will use the plant to manufacture a line of new products. The debt structure of the firm is as follows: Construction loan @ 12% Long term debenture @ 7% 10-year 10% Note LA construction. $ 8 000 000 12 000 000 5 000 000 The debentures and the 10-year 10% note were issued at the same time. (1) Compute the amount of interest payable during the year (3 marks) (ii) Determine the amount of interest cost to be capitalized to the plant under (6 marks) (ii) What amount of interest should be reported on the statement of comprehensive income? (2 marks)

Answer rating: 100% (QA)

i To compute the amount of interest payable during the year we need to calculate the interest paymen... View the full answer