On January 1, Sturdy Machines Inc. entered into a formal contract to construct a multipurpose warehouse...
On January 1, Sturdy Machines Inc. entered into a formal contract to construct a multipurpose warehouse for $15,000,000. To finance the construction project, the company immediately received an $8,000,000 construction loan from a local bank that included four $2,000,000 annual payments plus interest at 5%, with the remainder of the project financed with the company’s general debt facilities at a 7% weighted average interest rate. Assuming average accumulated expenses were $10,000,000 for the year and that actual interest costs incurred on all related borrowings was $890,000, what is the amount of capitalized interest costs recorded by the company?
Homework Answers
All the interest cost amounting $8,90,000 will be capitalized.
This is because the project is not completed yet.
Calculations
Interest on loan taken by the company = $8,00,0000 * 5% = $4,00,000
Remaining $70000000 = $70,00,000 *7% = $4,90,000
Total = $8,90,0000
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On January 1, Sturdy Machines Inc. entered into a formal
contract to construct a multipurpose warehouse...
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