On January 1, 2021, the Highlands Company began construction on a new manufacturing facility for its own use. The building was completed in 2022. The company borrowed $2,150,000 at 9% on January 1 to help finance the construction. In addition to the construction loan, Highlands had the following debt outstanding throughout 2021: $8,000,000, 14% bonds $2,000,000, 9% long-term note Construction expenditures incurred during 2021 were as follows: January 1 March 31 June 30 September 30 December 31 Required: Calculate the amount of interest capitalized for 2021 using the specific interest method. (Do not round the Intermediate calculations. Round your percentage answers to 1 decimal place (l.e. 0.123 should be entered as 12.3% ).) Average January 1 March 31 June 30 Date $ 880,000 1,480,000 1,136,000 880,000 680,000 September 30 December 31 Accumulated expenditure Average accumulated expenditures Expenditure Amount x x X X X X x Weight Interest Rate % % = = = Capitalized Interest
On January 1, 2021, the Highlands Company began construction on a new manufacturing facility for its own use. The building was completed in 2022. The company borrowed $2,150,000 at 9% on January 1 to help finance the construction. In addition to the construction loan, Highlands had the following debt outstanding throughout 2021: $8,000,000, 14% bonds $2,000,000, 9% long-term note Construction expenditures incurred during 2021 were as follows: January 1 March 31 June 30 September 30 December 31 Required: Calculate the amount of interest capitalized for 2021 using the specific interest method. (Do not round the Intermediate calculations. Round your percentage answers to 1 decimal place (l.e. 0.123 should be entered as 12.3% ).) Average January 1 March 31 June 30 Date $ 880,000 1,480,000 1,136,000 880,000 680,000 September 30 December 31 Accumulated expenditure Average accumulated expenditures Expenditure Amount x x X X X X x Weight Interest Rate % % = = = Capitalized Interest
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:On January 1, 2021, the Highlands Company began construction on a new manufacturing facility for its own use. The building was
completed in 2022. The company borrowed $2,150,000 at 9% on January 1 to help finance the construction. In addition to the
construction loan, Highlands had the following debt outstanding throughout 2021:
$8,000,000, 14% bonds
$2,000,000, 9% long-term note
Construction expenditures incurred during 2021 were as follows:
January 1
March 31
June 30
September 30
December 31
Date
$ 880,000
1,480,000
1,136,000
Required:
Calculate the amount of interest capitalized for 2021 using the specific interest method. (Do not round the Intermediate calculations.
Round your percentage answers to 1 decimal place (l.e. 0.123 should be entered as 12.3%).)
January 1
March 31
June 30
September 30
December 31
Accumulated expenditure
880,000
680,000
Average accumulated expenditures
Expenditure
Amount
x
x
X
X
X
X
Weight
Interest
Rate
%6
%6
=
=
=
=
=
Average
Capitalized
Interest
Expert Solution
Step 1 Introduction
Interest capitalize: The unpaid interest on your loan is added to the principle sum, which is what we mean when we talk about capitalization. When payments on a loan are deferred during times of deferral or forbearance and unpaid interest is capitalized, the principal amount of the loan continues to accrue interest at the same rate but at a faster rate.
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