Interest During Construction Alta Company is constructing a production complex that qualifies for interest capitalization. The following information is available:Capitalization period: January 1,2019 to june 30,2020Expenditures on project:Amounts borrowed and outstanding $1.5 million borrowed at 12% specifically for the project$6 million borrowed on July 1, 2015 at 14%$14 million borrowed on January 1,2014, at 8%Required :1. Compute the amount of intrest costs capitalized each year 2. If it is assumed tha the production complex has an extimated life of 20years and a residual value of $0, Compute the straight - line depreciation in 20203. Next Level Explain the effects of the interest capitalization on the financial statements for both years ignore income taxes. 2019January 1May 1October 1$ 540,000465,000600,0002020:March 11,500,000600,000June 30

Depreciation is defined as the method which assign the cost of physical asset to its expected life.…

Answered: 2019 January 1 May 1 October 1 $…

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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Interest During Construction Alta Company is constructing a production complex that qualifies for interest capitalization. The following information is available:

Capitalization period: January 1,2019 to june 30,2020
Expenditures on project:

Amounts borrowed and outstanding

$1.5 million borrowed at 12% specifically for the project
$6 million borrowed on July 1, 2015 at 14%
$14 million borrowed on January 1,2014, at 8%

Required :

1. Compute the amount of intrest costs capitalized each year

2. If it is assumed tha the production complex has an extimated life of 20years and a residual value of $0, Compute the straight - line depreciation in 2020

3. Next Level Explain the effects of the interest capitalization on the financial statements for both years ignore income taxes.

2019
January 1
May 1
October 1
$ 540,000
465,000
600,000
2020:
March 1
1,500,000
600,000
June 30

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