On January 1, 2020, Marigold, Inc. signed a fixed-price contract to have Builder Associates construct a major plant facility at a cost of $4,419,000. It was estimated that it would take 3 years to complete the project. Also on January 1, 2020, to finance the construction cost, Marigold borrowed $4,419,000 payable in 10 annual installments of $441,900, plus interest at the rate of 10%. During 2020, Marigold made deposit and progress payments totaling $1,657,125 under the contract; the weighted-average amount of accumulated expenditures was $883,800 for the year. The excess borrowed funds were invested in short-term securities, from which Marigold realized investment income of $254,600. What amount should Marigold report as capitalized interest at December 31, 2020?

On January 1, 2020, Marigold, Inc. signed a fixed-price contract to have Builder Associates construct a major plant facility at a cost of $4,419,000. It was estimated that it would take 3 years to complete the project. Also on January 1, 2020, to finance the construction cost, Marigold borrowed $4,419,000 payable in 10 annual installments of $441,900, plus interest at the rate of 10%. During 2020, Marigold made deposit and progress payments totaling $1,657,125 under the contract; the weighted-average amount of accumulated expenditures was $883,800 for the year. The excess borrowed funds were invested in short-term securities, from which Marigold realized investment income of $254,600. What amount should Marigold report as capitalized interest at December 31, 2020?

Financial Reporting, Financial Statement Analysis and Valuation

8th Edition

ISBN:9781285190907

Author:James M. Wahlen, Stephen P. Baginski, Mark Bradshaw

Publisher:James M. Wahlen, Stephen P. Baginski, Mark Bradshaw

Chapter9: Operating Activities

Section: Chapter Questions

Problem 18PC

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