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Situation I On January 1, 2025, Crane, Inc. signed a fixed-price contract to have Homeward Construction construct a major plant facility at a cost of $8,200,000. It was estimated that it would take 2 years to complete the project. Also on January 1, 2025, to finance the construction cost, Crane borrowed $8,200,000 payable in 8 annual installments of $1,025,000, plus interest at the rate of 8% During 2025, Crane made deposit and progress payments totaling $3,075,000 under the contract; the weighted-average amount of accumulated expenditures was $1,230,000 for the year. The excess borrowed funds were invested in short-term securities. from which Crane realized investment income of $174,000. What amount should Crane report as capitalized interest at December 31, 2025? Capitalized interest S 98400

Situation I On January 1, 2025, Crane, Inc. signed a fixed-price contract to have Homeward Construction construct a major plant facility at a cost of $8,200,000. It was estimated that it would take 2 years to complete the project. Also on January 1, 2025, to finance the construction cost, Crane borrowed $8,200,000 payable in 8 annual installments of $1,025,000, plus interest at the rate of 8% During 2025, Crane made deposit and progress payments totaling $3,075,000 under the contract; the weighted-average amount of accumulated expenditures was $1,230,000 for the year. The excess borrowed funds were invested in short-term securities. from which Crane realized investment income of $174,000. What amount should Crane report as capitalized interest at December 31, 2025? Capitalized interest S 98400

FINANCIAL ACCOUNTING
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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During 2025, Cheyenne Corporation constructed and manufactured certain assets and incurred the following interest costs in connection with those activities. Factory constructed for Cheyenne's own use Inventories routinely manufactured, produced on a repetitive basis Special-order machine for sale to unrelated customer, produced according to customer's specifications The total amount of interest costs to be capitalized Interest Costs Incurred 52500 $45,000 7,500 All of these assets required an extended period of time for completion. Assuming the effect of interest capitalization is material, what is the total amount of interest costs to be capitalized? 3,500
Transcribed Image Text:During 2025, Cheyenne Corporation constructed and manufactured certain assets and incurred the following interest costs in connection with those activities. Factory constructed for Cheyenne's own use Inventories routinely manufactured, produced on a repetitive basis Special-order machine for sale to unrelated customer, produced according to customer's specifications The total amount of interest costs to be capitalized Interest Costs Incurred 52500 $45,000 7,500 All of these assets required an extended period of time for completion. Assuming the effect of interest capitalization is material, what is the total amount of interest costs to be capitalized? 3,500
Your answer is correct. Situation I On January 1, 2025, Crane, Inc. signed a fixed-price contract to have Homeward Construction construct a major plant facility at a cost of $8,200,000. It was estimated that it would take 2 years to complete the project. Also on January 1, 2025, to finance the construction cost, Crane borrowed $8,200,000 payable in 8 annual installments of $1,025,000, plus interest at the rate of 8%. During 2025, Crane made deposit and progress payments totaling $3,075,000 under the contract; the weighted average amount of accumulated expenditures was $1,230,000 for the year. The excess borrowed funds were invested in short-term securities, from which Crane realized investment income of $174,000. What amount should Crane report as capitalized interest at December 31, 2025? Capitalized interest $ 98400
Transcribed Image Text:Your answer is correct. Situation I On January 1, 2025, Crane, Inc. signed a fixed-price contract to have Homeward Construction construct a major plant facility at a cost of $8,200,000. It was estimated that it would take 2 years to complete the project. Also on January 1, 2025, to finance the construction cost, Crane borrowed $8,200,000 payable in 8 annual installments of $1,025,000, plus interest at the rate of 8%. During 2025, Crane made deposit and progress payments totaling $3,075,000 under the contract; the weighted average amount of accumulated expenditures was $1,230,000 for the year. The excess borrowed funds were invested in short-term securities, from which Crane realized investment income of $174,000. What amount should Crane report as capitalized interest at December 31, 2025? Capitalized interest $ 98400
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