Stellar, Inc. has a fiscal year ending April 30. On May 1, 2017, Stellar borrowe

Question

Stellar, Inc. has a fiscal year ending April 30. On May 1, 2017, Stellar borrowed $10,424,000 at 11% to finance construction of its own building. Repayments of the loan are to commence the month following completion of the building. During the year ended April 30, 2018, expenditures for the partially completed structure totaled $7,296,800. These expenditures were incurred evenly throughout the year. Interest earned on the unexpended portion of the loan amounted to $677,560 for the year.

How much should be shown as capitalized interest on Stellar’s financial statements at April 30, 2018?

Explanation / Answer

Average accumulated expenditure = 7296800/2= 3648400 Capitalized interest on Stellar’s financial statements = 3648400*11%= 401324

Related Questions

Navigate

• Browse (All)
• Browse S
• Subjects

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