A company constructs a building for its own use. Construction began on January 1 and ended on December 30. The expenditures for construction were as follows: January 1, $500,000; March 31, $600,000; June 30, $400,000; October 30, $600,000. To help finance construction, the company arranged a 7% construction loan on January 1 for $700,000. The company’s other borrowings, outstanding for the whole year, consisted of a $3 million loan and a $5 million note with interest rates of 8% and 6%, respectively. Assuming the company uses the specific interest method, calculate the amount of interest capitalized for the year.
A company constructs a building for its own use. Construction began on January 1 and ended on December 30. The expenditures for construction were as follows: January 1, $500,000; March 31, $600,000; June 30, $400,000; October 30, $600,000. To help finance construction, the company arranged a 7% construction loan on January 1 for $700,000. The company’s other borrowings, outstanding for the whole year, consisted of a $3 million loan and a $5 million note with interest rates of 8% and 6%, respectively. Assuming the company uses the specific interest method, calculate the amount of interest capitalized for the year.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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A company constructs a building for its own use. Construction began on January 1 and ended on December 30. The expenditures for construction were as follows: January 1, $500,000; March 31, $600,000; June 30, $400,000; October 30, $600,000. To help finance construction, the company arranged a 7% construction loan on January 1 for $700,000. The company’s other borrowings, outstanding for the whole year, consisted of a $3 million loan and a $5 million note with interest rates of 8% and 6%, respectively. Assuming the company uses the specific interest method, calculate the amount of interest capitalized for the year.
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