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In: Accounting

On January 1, 2015 Costco began construction of a new warehouse in Redmond, WA. The building...

  1. On January 1, 2015 Costco began construction of a new warehouse in Redmond, WA. The building was completed on June 30, 2016. Cash outlays for the $5 million project were as follows:

2015

January 1                        $1,000,000

March 1                          $600,000

June 30                           $800,000

September 30               $750,000

December 1                   $600,000

2016

March 31                        $800,000

June 30                           $450,000 (final payment)

Total payments             $5,000,000

On January 1, 2015 Costco obtained a $3 million dollar construction loan with a 5% interest rate. Costco’s other long-term debt consisted of $30 million 6% bonds and $20 million of 8% bonds. All debt was outstanding throughout 2015 and 2016.

  1. Calculate the amount of interest to be capitalized in 2015.
  1. Calculate the amount of interest to be capitalized in 2016.
  1. What is the final total capitalized cost of the warehouse?
  1. How much interest expense is reported in Costco’s Income Statement for both 2015 and 2016?

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    *Please rate my answer.

    ekkarill92 answered 2 years ago
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