On January 1, 2021, the Marjlee Company began construction of an office building to be used as itscorporate headquarters. The building was completed early in 2022. Construction expenditures for,2021, which were incurred evenly throughout the year, totaled $7,800,000. Marjlee had the followingdebt obligations which were outstanding during all of 2021:Construction loan, 11%Long-term note, 10%Long-term note, 7%$1,950,0002,600,0005,200,000Required:Calculate the amount of interest capitalized in 2021 for the building using the specific interest method.Interest capitalized

Solution: Weighted average interest rate of all other debt Debt Amount Interest rate Interest amount 10% Note $26,00,000 10% $2,60,000 7% Note $52,00,000 7% $3,64,000 Totals $78,00,000 $6,24,000 Weighted average rate (total interets/ total debt) 8.00% Average Interest Rate Capitalized Interest Construction Loan $1,950,000 11.00% $214,500 Other debt [(7800000/2) - 1950000] $1,950,000 8.00% $156,000 Total Interest Capitalized $370,500

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On January 1, 2021, the Marjlee Company began construction of an office building to be used as corporate headquarters. The building was completed early in 2022. Construction expenditures 2021, which were incurred evenly throughout the year, totaled $7,800,000. Marjlee had the follo debt obligations which were outstanding during all of 2021: Construction loan, 11% Long-term note, 10% Long-term note, 7% $1,950,000 2,600,000 5,200,000

On January 1, 2021, the Marjlee Company began construction of an office building to be used as corporate headquarters. The building was completed early in 2022. Construction expenditures 2021, which were incurred evenly throughout the year, totaled $7,800,000. Marjlee had the follo debt obligations which were outstanding during all of 2021: Construction loan, 11% Long-term note, 10% Long-term note, 7% $1,950,000 2,600,000 5,200,000

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

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