Compute the maximum amount of interest expense

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Question - During the year, the following items were charged to the interest expense account of Doe Corporation:

Interest on additional income taxes assessed two years ago$400Interest on bank loan to finance installation of new machinery. Bank loan was refinanced when installation was completed$700Interest deducted by bank from proceeds of Doe Corporation's 60-day note signed December 1, payable in full 60 days later$500

Compute the maximum amount of interest expense that Doe Corporation, an accrual basis taxpayer, can deduct for the current year?

1) $1,600

2) $1,100

3) $1,350

4) $700

5) None of these

Reference no: EM132572457

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