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Computing Interest Capitalization Amounts Whit Company spent a total of $360,000 cash on a construction project during Year 1 and Year 2. During Year 3, Whit spends an additional $720, 000 evenly during the year on the project and completes construction at the end of Year 3. Debt outstanding during Year 3 follows. Accounts payable average balance: $60,000 10% bond payable: 840,000$ 12% construction loan: 240,000$ a. Compute the amount of interest to be capitalized in Year 3. b. Calculate the amount of interest to expense in Year 3.

Computing Interest Capitalization Amounts Whit Company spent a total of $360,000 cash on a construction project during Year 1 and Year 2. During Year 3, Whit spends an additional $720, 000 evenly during the year on the project and completes construction at the end of Year 3. Debt outstanding during Year 3 follows. Accounts payable average balance: $60,000 10% bond payable: 840,000$ 12% construction loan: 240,000$ a. Compute the amount of interest to be capitalized in Year 3. b. Calculate the amount of interest to expense in Year 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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Computing Interest Capitalization Amounts Whit Company spent a total of $360,000 cash on a construction project during Year 1 and Year 2. During Year 3, Whit spends an additional $720, 000 evenly during the year on the project and completes construction at the end of Year 3. Debt outstanding during Year 3 follows. Accounts payable average balance: $60,000 10% bond payable: 840,000$ 12% construction loan: 240,000$ a. Compute the amount of interest to be capitalized in Year 3. b. Calculate the amount of interest to expense in Year 3.
Transcribed Image Text:Computing Interest Capitalization Amounts Whit Company spent a total of $360,000 cash on a construction project during Year 1 and Year 2. During Year 3, Whit spends an additional $720, 000 evenly during the year on the project and completes construction at the end of Year 3. Debt outstanding during Year 3 follows. Accounts payable average balance: $60,000 10% bond payable: 840,000$ 12% construction loan: 240,000$ a. Compute the amount of interest to be capitalized in Year 3. b. Calculate the amount of interest to expense in Year 3.
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