In: Finance
On January 1, 2018, Dreamworld Co. began construction of a new warehouse. The building was finished and ready for use on September 30, 2019. Expenditures on the project were as follows:
January 1, 2018 |
$ |
300,000 |
|
September 1, 2018 |
$ |
450,000 |
|
December 31, 2018 |
$ |
450,000 |
|
March 31, 2019 |
$ |
450,000 |
Dreamworld had the following debt obligations outstanding during both years:
Construction loan, 10% $500,000
Long-term note, 12% $2,500,000
Required: What would Dreamworld's capitalized interest be in 2018?
$50,000 |
||
None of the above |
||
$134,000 |
||
$45,000 |
||
$52,500 |
Date | Amount incurred | No. of months | Weighted average amount |
a | b | c=a × b/12 | |
Jan.1 | 300,000 | 12 | 300,000 |
Sep.1 | 450,000 | 4 | 150,000 |
Dec. 31 | 450,000 | - | - |
Accumulated expenditure | 450,000 |
Interest capitalized = 450,000 * 10% (rate on construction loan) = 45,000
Answer is 45,000
please rate.