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Determine the amount of interest to be capitalized in 2010 in relation to the construction of the building.

Determine the amount of interest to be capitalized in 2010 in relation to the construction of the building.

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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On December 31, 2009, Hurston Inc. borrowed $4,000,000 at 10% payable annually to finance the construction of a new building. In 2010, the company made the following expenditures related to this building: March 1, $250,000; June 1, $500,000; July 1, $1,600,000; December 1, $1,100,000.

Additional information is provided as follows.

  1. Other debt outstanding

10-year, 11.5 % bond, December 31, 2003, interest payable annually on $6,000, 000

6-year, 12.5 % note, dated December 31, 2007, interest payable annually

on $5000, 000

  1. March 1, 2010, expenditure included land costs of $150,000
  2. Interest revenue earned in 2010 on funds related to specific borrowing $49,000

Instructions:

Determine the amount of interest to be capitalized in 2010 in relation to the construction of the building.

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