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Christopher Company Borrowed $6 Million at 11% on January 1 \quad

Question 88

Essay

Christopher Company borrowed $6 million at 11% on January 1, 2016, to build a new building. The building is expected to take 18 months to complete. Christopher invests the money from the project until it is needed for construction. He is currently earning 10%. The following is the expenditures as they relate to the construction of the building.
January 1 \quad \quad $1,500,000
April 1 \quad \quad \quad $1,850,000
October 1 \quad \quad $1,100,000
December 31 \quad $1,000,000
Required:
1) Compute the amount of interest expense Christopher would capitalize.
2) Compute the amount of interest revenue Christopher would recognize.

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