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Liddy Corp. began constructing a new warehouse for its operations during the current year. In the year Liddy incurred interest of $30,000 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 $40,000. What amount of interest should Liddy expense for the year?

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Parrain

Answer: $60,000

Explanation:

Liddy should expense the $30,000 interest on a working capital loan.

Liddy should also expense the difference between the interest on the construction loan and the interest on the average accumulated expenditures for the warehouse construction as the $40,000 is directly related to the construction. The difference should therefore be expensed.

= 70,000 - 40,000

= $30,000

Interest to be expensed  = 30,000 + 30,000

= $60,000

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