Culiver, Inc. is constructing a building that qualifies for interest capitalization. The following information is available:
Capitalization period: January 1, 2013-December 31, 2014 Expenditures on project (incurred evenly):
Amounts borrowed and outstanding (all debt incurred January 1, 2013):

Required: a.Compute the amount of interest that should be capitalized in 2013 and 2014. (Round interest rates to the nearest hundredths, e.g., 07.62%.)
b.Assume that in 2013 unused borrowed funds were invested and earned interest revenue amounting to $600. How much interest should be capitalized to the asset account in 2014?

Question

Culiver, Inc. is constructing a building that qualifies for interest capitalization. The following information is available:
Capitalization period: January 1, 2013-December 31, 2014 Expenditures on project (incurred evenly): 
 Amounts borrowed and outstanding (all debt incurred January 1, 2013):

Required: a.Compute the amount of interest that should be capitalized in 2013 and 2014. (Round interest rates to the nearest hundredths, e.g., 07.62%.)
b.Assume that in 2013 unused borrowed funds were invested and earned interest revenue amounting to $600. How much interest should be capitalized to the asset account in 2014?

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, 2013-December 31, 2014 Expenditures on project (incurred evenly): 
 Amounts borrowed and outstanding (all debt incurred January 1, 2013):

Required: a.Compute the amount of interest that should be capitalized in 2013 and 2014. (Round interest rates to the nearest hundredths, e.g., 07.62%.)
b.Assume that in 2013 unused borrowed funds were invested and earned interest revenue amounting to $600. How much interest should be capitalized to the asset account in 2014?