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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, 2019, to June 30, 2020 Expenditures on project: 2019:       January 1 $ 516,000   May 1 381,000   October 1 516,000 2020:       March 1 1,620,000   June 30 588,000 Amounts borrowed and outstanding:    $1.5 million borrowed at 12%, specifically for the project    $5 million borrowed on July 1, 2018, at 14%    $10 million borrowed on January 1, 2017, at 8% Required: Note: Round all final numeric answers to two decimal places. Compute the amount of interest costs capitalized each year. Capitalized interest, 2019 $ fill in the blank 1 Capitalized interest, 2020 $ fill in the blank 2 If it is assumed that the production complex has an estimated life of 25 years and a residual value of $0, compute the straight-line depreciation in 2020. $ fill in the blank 3

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: 2019:       January 1 $ 516,000   May 1 381,000   October 1 516,000 2020:       March 1 1,620,000   June 30 588,000 Amounts borrowed and outstanding:    $1.5 million borrowed at 12%, specifically for the project    $5 million borrowed on July 1, 2018, at 14%    $10 million borrowed on January 1, 2017, at 8% Required: Note: Round all final numeric answers to two decimal places. Compute the amount of interest costs capitalized each year. Capitalized interest, 2019 $ fill in the blank 1 Capitalized interest, 2020 $ fill in the blank 2 If it is assumed that the production complex has an estimated life of 25 years and a residual value of $0, compute the straight-line depreciation in 2020. $ fill in the blank 3

FINANCIAL ACCOUNTING
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:
    2019:    
      January 1 $ 516,000
      May 1 381,000
      October 1 516,000
    2020:    
      March 1 1,620,000
      June 30 588,000
  • Amounts borrowed and outstanding:
       $1.5 million borrowed at 12%, specifically for the project
       $5 million borrowed on July 1, 2018, at 14%
       $10 million borrowed on January 1, 2017, at 8%

Required:

Note: Round all final numeric answers to two decimal places.

  1. Compute the amount of interest costs capitalized each year.
    Capitalized interest, 2019 $ fill in the blank 1
    Capitalized interest, 2020 $ fill in the blank 2
  2. If it is assumed that the production complex has an estimated life of 25 years and a residual value of $0, compute the straight-line depreciation in 2020.
    $ fill in the blank 3
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