Question
In: Accounting
On January 1, 2021, the Shagri Company began construction on a new manufacturing facility for its...
On January 1, 2021, the Shagri Company began construction on a
new manufacturing facility for its own use. The building was
completed in 2022. The only interest-bearing debt the company had
outstanding during 2021 was long-term bonds with a book value of
$11,400,000 and an effective interest rate of 9%. Construction
expenditures incurred during 2021 were as follows:
| January 1 | $ | 640,000 | |
| March 1 | 684,000 | ||
| July 31 | 564,000 | ||
| September 30 | 740,000 | ||
| December 31 | 440,000 | ||
Required:
Calculate the amount of interest capitalized for 2021.
Solutions
Expert Solution
| Date | Expenditure | Weight | Weighted Expenditure |
| Jan-01 | 640,000 | 12/12 | 640,000 |
| Mar-01 | 684,000 | 10/12 | 570,000 |
| Jul-31 | 564,000 | 5/12 | 235,000 |
| Sep-30 | 740,000 | 3/12 | 185,000 |
| Dec-31 | 440,000 | 0 | - |
| Total | 3,068,000 | 1,630,000 |
| Weighted Expenditure | 1,630,000 | ||
| x Interest rate | 9% | ||
| Amount of interest capitalized for 2021 | $ 146,700 | ||
ekkarill92 answered 5 months agoRelated Solutions
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