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Alta Company is constructing a production complex that qualifies for interest capitalization. The following information is available: Capitalization period: January 1, Year 1, to June 30, Year 2 Expenditures on project: Year 1:       January 1 $ 576,000   May 1 357,000   October 1 540,000 Year 2:       March 1 1,476,000   June 30 708,000 Amounts borrowed and outstanding:   $1.3 million borrowed at 12%, specifically for the project   $7 million borrowed on January 1, Year 1, at 14%   $18 million borrowed on January 1, Year 1, at 8% Round all final numeric answers to two decimal places. Compute the amount of interest costs capitalized each year. Capitalized interest, Year 1 $ Capitalized interest, Year 2 $ If it is assumed that the production complex has an estimated life of 20 years and a residual value of $0, compute the straight-line depreciation in Year 2.

Alta Company is constructing a production complex that qualifies for interest capitalization. The following information is available: Capitalization period: January 1, Year 1, to June 30, Year 2 Expenditures on project: Year 1:       January 1 $ 576,000   May 1 357,000   October 1 540,000 Year 2:       March 1 1,476,000   June 30 708,000 Amounts borrowed and outstanding:   $1.3 million borrowed at 12%, specifically for the project   $7 million borrowed on January 1, Year 1, at 14%   $18 million borrowed on January 1, Year 1, at 8% Round all final numeric answers to two decimal places. Compute the amount of interest costs capitalized each year. Capitalized interest, Year 1 $ Capitalized interest, Year 2 $ If it is assumed that the production complex has an estimated life of 20 years and a residual value of $0, compute the straight-line depreciation in Year 2.

Financial Reporting, Financial Statement Analysis and Valuation
Financial Reporting, Financial Statement Analysis and Valuation
8th Edition
ISBN:9781285190907
Author:James M. Wahlen, Stephen P. Baginski, Mark Bradshaw
Publisher:James M. Wahlen, Stephen P. Baginski, Mark Bradshaw
Chapter9: Operating Activities
Section: Chapter Questions
Problem 18PC
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Alta Company is constructing a production complex that qualifies for interest capitalization. The following information is available:

  • Capitalization period: January 1, Year 1, to June 30, Year 2
  • Expenditures on project:
    Year 1:    
      January 1 $ 576,000
      May 1 357,000
      October 1 540,000
    Year 2:    
      March 1 1,476,000
      June 30 708,000
  • Amounts borrowed and outstanding:
       $1.3 million borrowed at 12%, specifically for the project
       $7 million borrowed on January 1, Year 1, at 14%
       $18 million borrowed on January 1, Year 1, at 8%

Round all final numeric answers to two decimal places.

  1. Compute the amount of interest costs capitalized each year.
    Capitalized interest, Year 1 $
    Capitalized interest, Year 2 $
  2. If it is assumed that the production complex has an estimated life of 20 years and a residual value of $0, compute the straight-line depreciation in Year 2.
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