Answered: Calculate Dexter's capitalized interest…

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

Dexter Construction Corporation is building a student condominium complex; it started construction on January 1, Year 1. Dexter borrowed $2.5 million on January 1 specifically for the project by issuing a 10%, 5-year, $2.5 million note, which is payable on December 31 of Year 3. Dexter also had a 12%, 5-year, $3 million note payable and a 10%, 10-year, $1.8 million note payable outstanding all year.

Calculate Dexter's capitalized interest on the student condominium complex for Year 1.

In Year 1, Dexter incurred costs as follows

January 1		$300,000
March 1		600,000
June 30		1,000,000
November 1		480,000

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