On December 31, 2016, Marin Inc. borrowed $4,500,000 at 12% payable annually to

Question

On December 31, 2016, Marin Inc. borrowed $4,500,000 at 12% payable annually to finance the construction of a new building. In 2017, the company made the following expenditures related to this building: March 1, $540,000; June 1, $900,000; July 1, $2,250,000; December 1, $2,250,000. The building was completed in February 2018. Additional information is provided as follows.

$73,500

Determine the amount of interest to be capitalized in 2017 in relation to the construction of the building.

1. Other debt outstanding 10-year, 13% bond, December 31, 2010, interest payable annually $6,000,000 6-year, 10% note, dated December 31, 2014, interest payable annually $2,400,000 2. March 1, 2017, expenditure included land costs of $225,000 3. Interest revenue earned in 2017

$73,500

Explanation / Answer

Date Amount Period Average accumulated expenditure 1-Mar 540000 10/12 450000 1-Jun 900000 7/12 525000 1-Jul 2250000 6/12 1125000 1-Dec 2250000 1/12 187500 Total 2287500 The amount of interest to be capitalized = 2287500*12%= $274500

Related Questions

Navigate

• Browse (All)
• Browse O
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.