Alta Company is constructing a production complex that qualifies for interest capitalization. The following information is available:Capitalization period: January 1, 2019, to June 30, 2020Expenditures on project:2019: January 1$ 456,000 May 1417,000 October 1648,0002020: March 11,512,000 June 30708,000Amounts borrowed and outstanding: $1.7 million borrowed at 10%, specifically for the project $7 million borrowed on July 1, 2018, at 12% $14 million borrowed on January 1, 2017, at 6%Required:Note: Round all final numeric answers to two decimal places.Compute the amount of interest costs capitalized each year.Capitalized interest, 2019$___________________Capitalized interest, 2020$___________________If it is assumed that the production complex has an estimated life of 20 years and a residual value of $0, compute the straight-line depreciation in 2020.$________________

The computation of the amount of interest cost capitalized of 2019 and 2020 is shown below:- hence, the amount of interest costs capitalized : 2019 is $110,400 2020 is $134,770

Answered: ta Company is constructing a production…

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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Alta Company is constructing a production complex that qualifies for interest capitalization. The following information is available:

Capitalization period: January 1, 2019, to June 30, 2020
Expenditures on project:

2019:

January 1 $ 456,000

May 1 417,000

October 1 648,000

2020:

March 1 1,512,000

June 30 708,000
Amounts borrowed and outstanding:
   $1.7 million borrowed at 10%, specifically for the project
   $7 million borrowed on July 1, 2018, at 12%
   $14 million borrowed on January 1, 2017, at 6%

Required:

Note: Round all final numeric answers to two decimal places.

Compute the amount of interest costs capitalized each year.

Capitalized interest, 2019 $___________________

Capitalized interest, 2020 $___________________
If it is assumed that the production complex has an estimated life of 20 years and a residual value of $0, compute the straight-line depreciation in 2020.

$________________

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