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 $ 624,000 May 1 501,000 October 1 612,000 2020: March 1 1,596,000 June 30 660,000 Amounts borrowed and outstanding: $1.5 million borrowed at 12%, specifically for the project $8 million borrowed on July 1, 2018, at 14% $14 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 Capitalized interest, 2020 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. __________ Since GAAP requires accrual accounting, if a company capitalizes interest during the construction period it will report income than if it had not capitalized interest. In future periods, the same company will report __________ income than if it had not capitalized interest.
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 $ 624,000 May 1 501,000 October 1 612,000 2020: March 1 1,596,000 June 30 660,000 Amounts borrowed and outstanding: $1.5 million borrowed at 12%, specifically for the project $8 million borrowed on July 1, 2018, at 14% $14 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 Capitalized interest, 2020 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. __________ Since GAAP requires accrual accounting, if a company capitalizes interest during the construction period it will report income than if it had not capitalized interest. In future periods, the same company will report __________ income than if it had not capitalized interest.
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 $ 624,000 May 1 501,000 October 1 612,000 2020: March 1 1,596,000 June 30 660,000 - Amounts borrowed and outstanding:
$1.5 million borrowed at 12%, specifically for the project
$8 million borrowed on July 1, 2018, at 14%
$14 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 Capitalized interest, 2020 - 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. __________
- Since GAAP requires accrual accounting, if a company capitalizes interest during the construction period it will report income than if it had not capitalized interest. In future periods, the same company will report __________ income than if it had not capitalized interest.
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