Question

On January 2, 2020, Vaughn Manufacturing began construction of a new citrus processing plant. The automated plant was finished and ready for use on September 30, 2021. Expenditures for the construction were as follows:

January 2, 2020	$ 599000
September 1, 2020	1801200
December 31, 2020	1801200
March 31, 2021	1801200
September 30, 2021	1220000

Vaughn Manufacturing borrowed $3230000 on a construction loan at 10% interest on January 2, 2020. This loan was outstanding during the construction period. The company also had $13680000 in 7% bonds outstanding in 2020 and 2021.

The interest capitalized for 2020 was:

$159600

$479060

$478800

$119940

Answer 1

Answer:

Option 4th is correct. i.e $119,940

Interest Capitalized for 2020
Date	Expenditure	Weight	Average
02-Jan-20	5,99,000	12/12	5,99,000
01-Sep-20	18,01,200	4/12	6,00,400
31-Dec-20	18,01,200	0/12	-
Accumulated   Expenditures	42,01,400		11,99,400
Interest Capitalized for 2020 = 11,99,400 x 10% = 1,19,940