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capitalized interest multiple year computation refer to practice 10 6 assume that co 692266

Capitalized Interest: Multiple Year Computation

Refer to Practice 10 6. Assume that construction was not completed on December 31 of Year 1. Also assume that the same loans were outstanding for all of Year 2.The following expenditure was made during Year 2:

July 1 

$500,000

Final construction was completed on December 31 of Year 2. Compute (1) the amount of interest capitalized during Year 2 and (2) the recorded cost of the building at the end of Year 2.

Practice 10 6

Capitalized Interest: Single Year Computation

The company had the following loans outstanding for the entire year:

 

Amount

Interest Rate

Specific construction loan

$100,000

10%

General loan

2,000,000

12

The company began the self construction of a building on January 1. The following expenditures were made during the year:

1 Jan

$100,000

1 May

200,000

1 Nov

300,000

Total

$600,000

Construction was completed on December 31. Compute (1) the amount of interest capitalized during the year and (2) the recorded cost of the building at the end of the year.

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