During 2010, Kimmel Co.incurred average accumulated expenditures of $400,000 during construction of assets that qualified for capitalization of interest.The only debt outstanding during 2010 was a $500,000, 10%, 5-year note payable dated January 1, 2008.What is the amount of interest that should be capitalized by Kimmel during 2010?

Question

Quizplus · Accepted Answer

The amount of interest that should be capitalized during 2010 is calculated as follows:
Interest expense = Average accumulated expenditures × Interest rate
= $400,000 × 10%
= $40,000
Since the only debt outstanding during 2010 was the note payable dated January 1, 2008, there were no interest expenses incurred in 2010 that needed to be capitalized. Therefore, the answer is $40,000.