Interest During Construction Sunfish Company is constructing a building that qualifies for interest capitalization. It is build between January 1 and December 31, 2021. Sunfish made the following expenditures related to this building: 1-May $ 1-Jun 5 1-Aug $ 1-Dec $ 370,000 410,000 500,000 130,000 The company borrowed $550,000 at 11% to help finance the project. In addition, Sunfish had outstanding borrowings of $2 million at 7% and $1 million at 8%. Required: 1 Compute the amount of interest to be capitalized related to the construction of the building. 2 Next Level: What effect does the interest capitalization have on the company's financial statements after it completes the building?

Interest During Construction Sunfish Company is constructing a building that qualifies for interest capitalization. It is build between January 1 and December 31, 2021. Sunfish made the following expenditures related to this building: 1-May $ 1-Jun 5 1-Aug $ 1-Dec $ 370,000 410,000 500,000 130,000 The company borrowed $550,000 at 11% to help finance the project. In addition, Sunfish had outstanding borrowings of $2 million at 7% and $1 million at 8%. Required: 1 Compute the amount of interest to be capitalized related to the construction of the building. 2 Next Level: What effect does the interest capitalization have on the company's financial statements after it completes the building?

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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am.103.
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Contact Support for textbook, writing, or account heln Balance Corporation borrowed P10,000,000 at 12% to finance in part the construction of a new office building on January 1, 2021 and in part for general purposes. The loan is to be repaid commencing the month following completion of the building. Expenditures for the completed structure totaled P8,000,000 during the year ended December 31, 2021. These expenditures were incurred evenly throughout the year. The entity earned interest of P80,000 for the year on the unexpended portion of the loan. What amount of interest is capitalized on December 31, 2021? What is the interest expense for 2021? O 720,000 O 1,000,000 O 1.200.000
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