Question

On December 31, 2019, Metlock Inc. borrowed $3,660,000 at 13% payable annually to finance the construction of a new building. In 2020, the company made the following expenditures related to this building: March 1, $439,200, June 1, $732,000; July 1, $1,830,000; December 1, $1,830,000. The building was completed in February 2021. Additional information is provided as follows. 1. Other debt outstanding 10-year, 14% bond, December 31, 2013, interest payable annually $4,880,000 6-year, 11% note, dated December 31, 2017, interest payable annually $1,952,000 2. March 1, 2020, expenditure included land costs of $183,000 3. Interest revenue earned in 2020 $59,780 X Your answer is incorrect. Determine the amount of interest to be capitalized in 2020 in relation to the construction of the building. The amount of interest $ 1131855

Answer 1

The amount of Interest	$                 2,41,865
Workings:
Expenditure for the year
Mar-01	$                 4,39,200	X	10 / 12	=	$   3,66,000
Jun-01	$                 7,32,000	X	7 / 12	=	$   4,27,000
Jul-01	$              18,30,000	X	6 / 12		$   9,15,000
Dec-01	$              18,30,000	X	1 / 12	=	$   1,52,500
	$              48,31,200				$ 18,60,500
Interest Capitalized
$                         18,60,500	X	13%		=	$   2,41,865