Question

KNO Enterprises begins construction of an asset on January 1, 2014, and completes construction on December 31, 2014. KNO Enterprises pays the following amounts related to construction:

$920,000	January 1
$2,000,000	July 1
$1,000,000	December 1

Calculate the average accumulated expenditures for the purpose of capitalizing interest.

Do not round intermediate calculations. If required, round your final answer to the nearest dollar.
$

Part B

KNO Enterprises purchased an asset on January 1, 2014, for $9,300. The asset was expected to have a ten-year life and a $1,000 salvage value. KNO Enterprises uses the straight-line method of depreciation. On January 1, 2016, KNO Enterprises made a major repair to the asset of $5,000, extending its life. The asset is expected to last ten years from January 1, 2016.

Calculate the amount of depreciation for 2016.

Answer 1

1-	Month	amount outstanding	period for which amount is outstanding
	1-Jan	920000	6	5520000
	1-Jul	2920000	5	14600000
	1-Dec	3920000	1	3920000
	total of accumulated expenditure duing the year			24040000
	Average accumulated expenditure	24040000/12		2003333.333
2-	cost of machine on purchase		9300
	less scrap value		1000
	amount to be depreciated		8300
	life of machine		10
	annual depreciation	8300/10	830
	Depreciation accumulated during the 2 year period		830*2	1660
	balance in book value of machine at jan 1 2016	8300-1660	6640
	major repair		5000
	new book value of machine		11640
	life of machine		10
	annual depreciation in year 2016	11640/10	1164