On January 1, 2018, the Shagri Company began construction on a new manufacturing facility for its...
On January 1, 2018, the Shagri Company began construction on a
new manufacturing facility for its own use. The building was
completed in 2019. The only interest-bearing debt the company had
outstanding during 2018 was long-term bonds with a book value of
$11,700,000 and an effective interest rate of 8%. Construction
expenditures incurred during 2018 were as follows:
| January 1 | $ | 670,000 | |
| March 1 | 702,000 | ||
| July 31 | 582,000 | ||
| September 30 | 770,000 | ||
| December 31 | 470,000 | ||
Required:
Calculate the amount of interest capitalized for 2018.
|
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Homework Answers
Calculate the amount of interest capitalized for 2018.
| Date | Expenditure | * | Weight | = | Average |
| January 1 | 670000 | * | 12/12 | = | 670000 |
| March 1 | 702000 | * | 10/12 | = | 585000 |
| July 31 | 582000 | * | 5/12 | = | 242500 |
| September 30 | 770000 | * | 3/12 | = | 192500 |
| December 31 | 470000 | * | 0/12 | = | 0 |
| Accumulated expenditure | 3194000 | 1690000 | |||
| Average | * | Interest rate | = | Capitalized interest | |
| Average accumulated expenditure | 1690000 | * | 8% | = | 135200 |
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