Interest During ConstructionMatrix Inc. borrowed $1,000,000 at 8% to finance the construction of a new building for its own use. Construction beganon January 1, 2019, and was completed on October 31, 2019. Expenditures related to this building were:January 1 $258,000 (includes cost of purchasing land of $150,000)May 1320,000July 1420,000October 31 280,000In addition, Matrix had additional debt (unrelated to the construction) of $500,000 at 9% and $800,000 at 10%. All debtwas outstanding for the entire year.Required:1. Compute the amount of interest capitalized related to the construction of the building.2. If the expenditures are assumed to have been incurred evenly throughout the year:Compute weighted average accumulated expendituresCompute the amount of interest capitalized on the building

The adding of unpaid interest towards the principal sum of your loan is known as capitalization.…

1. Compute the amount of interest capitalized related to the construction of the building. 2. If the expenditures are assumed to have been incurred evenly throughout the year: Compute weighted average accumulated expenditures Compute the amount of interest capitalized on the building

1. Compute the amount of interest capitalized related to the construction of the building. 2. If the expenditures are assumed to have been incurred evenly throughout the year: Compute weighted average accumulated expenditures Compute the amount of interest capitalized on the building

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Question

Interest During Construction
Matrix Inc. borrowed $1,000,000 at 8% to finance the construction of a new building for its own use. Construction began
on January 1, 2019, and was completed on October 31, 2019. Expenditures related to this building were:
January 1 $258,000 (includes cost of purchasing land of $150,000)
May 1
320,000
July 1
420,000
October 31 280,000
In addition, Matrix had additional debt (unrelated to the construction) of $500,000 at 9% and $800,000 at 10%. All debt
was outstanding for the entire year.
Required:
1. Compute the amount of interest capitalized related to the construction of the building.
2. If the expenditures are assumed to have been incurred evenly throughout the year:
Compute weighted average accumulated expenditures
Compute the amount of interest capitalized on the building

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