Culiver, Inc. is constructing a building that qualifies for interest capitalization. The following information is available: Capitalization period: January 1, 2016-December 31, 2017 Expenditures on project incurred evenly):
2016 $\quad $ $20,000
2017 $\quad $ $60,000
Amounts borrowed and outstanding all debt incurred January 1, 2016):
$10,000 at $\quad $ 10% specifically for the construction project)
$18,000 at $\quad $12% general debt)
$30,000 at $\quad $14% general debt)
Required:
a. Compute the amount of interest that should be capitalized in 2016 and 2017. Round interest rates to the nearest hundredths,
b. Assume that in 2016 unused borrowed funds were invested and earned interest revenue amounting to $600. How much interest should be capitalized to the asset account in 2017?
e.g., 07.62%.)

Question

Culiver, Inc. is constructing a building that qualifies for interest capitalization. The following information is available: Capitalization period: January 1, 2016-December 31, 2017 Expenditures on project incurred evenly):
2016 $\quad $ $20,000
2017 $\quad $ $60,000
Amounts borrowed and outstanding all debt incurred January 1, 2016):
$10,000 at $\quad $ 10% specifically for the construction project)
$18,000 at  $\quad $12% general debt)
$30,000 at $\quad $14% general debt)
Required:
a. Compute the amount of interest that should be capitalized in 2016 and 2017. Round interest rates to the nearest hundredths,
b. Assume that in 2016 unused borrowed funds were invested and earned interest revenue amounting to $600. How much interest should be capitalized to the asset account in 2017?
e.g., 07.62%.)

Quizplus · Accepted Answer

The Answer of Culiver, Inc. is constructing a building that qualifies for interest capitalization. The following information is available: Capitalization period: January 1, 2016-December 31, 2017 Expenditures on project incurred evenly):
2016 $\quad $ $20,000
2017 $\quad $ $60,000
Amounts borrowed and outstanding all debt incurred January 1, 2016):
$10,000 at $\quad $ 10% specifically for the construction project)
$18,000 at  $\quad $12% general debt)
$30,000 at $\quad $14% general debt)
Required:
a. Compute the amount of interest that should be capitalized in 2016 and 2017. Round interest rates to the nearest hundredths,
b. Assume that in 2016 unused borrowed funds were invested and earned interest revenue amounting to $600. How much interest should be capitalized to the asset account in 2017?
e.g., 07.62%.)

Culiver, Inc \quad $20,000 2017 \quad $60,000 Amounts Borrowed and Outstanding All Debt Incurred January 1

Culiver, Inc $\quad$ $20,000
2017 $\quad$ $60,000
Amounts Borrowed and Outstanding All Debt Incurred January 1