During calendar 2020, Somalia Corp. incurred weighted-average accumulated expenditures of $ 800,000 during construction of assets that qualified for capitalization of interest. The only debt outstanding during 2020 was a $ 900,000, 8%, five-year note payable dated January 1, 2018. The amount of interest that should be capitalized during calendar 2020 is

Question

Quizplus · Accepted Answer

To determine the amount of interest that should be capitalized, we need to calculate the weighted-average accumulated expenditures during the construction period and then multiply it by the interest rate of the outstanding debt.

Weighted-average accumulated expenditures = $800,000

Interest rate of the note payable = 8%

Therefore, the amount of interest that should be capitalized = $800,000 x 8% = $64,000

So, the correct answer is C, $64,000.

During Calendar 2020, Somalia Corp