Intermediate Accounting: Reporting And Analysis
3rd Edition
ISBN: 9781337788281
Author: James M. Wahlen, Jefferson P. Jones, Donald Pagach
Publisher: Cengage Learning
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Question
Chapter 10, Problem 17E
1.
To determine
Calculate the amount of interest capitalized associated with the construction of the building.
2.
To determine
Explain the impact of interest capitalization on the financial statements of company.
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Students have asked these similar questions
Interest During Construction
Snowbird Company is constructing a building that qualifies for interest capitalization. It is built between January 1 and December 31, 2019. Snowbird made the following
expenditures related to this building:
April 1
$396,000
July 1
400,000
September 1
510,000
December 1 120,000
The company borrowed $500,000 at 12% to help finance the project. In addition, Snowbird had outstanding borrowings of $2 million at 8% and $1 million at 9%.
Required:
1. Compute the amount of interest capitalized related to the construction of the building. Do not round your interim calculations. Round your final answer to the
nearest dollar.
74,750
X
2. Next Level In the current period, the capitalization of interest decreases shareholders' equity
decreases depreciation expense
; in future period the effect of capitalized interest is to
Snowbird Company is constructing a building that qualifies for interest capitalization. It is built between January 1 and December 31, 2019. Snowbird made the following expenditures related to this building:
April 1
$396,000
July 1
400,000
September 1
510,000
December 1
120,000
The company borrowed $500,000 at 12% to help finance the project. In addition, Snowbird had outstanding borrowings of $2 million at 8% and $1 million at 9%.
Required:
Compute the amount of interest capitalized related to the construction of the building. Do not round your interim calculations. Round your final answer to the nearest dollar.
Next Level In the current period, the capitalization of interest
; in future period the effect of capitalized interest is to
.
interest During Construction
Sunfish Company is constructing a building that qualifies for interest capitalization. It is build between January 1 and
December 31, 2021. Sunfish made the following expenditures related to this building:
370,000
1-May $
1-Jun 5 410,000
1-Aug $
1-Dec $
500,000
130,000
The company borrowed $550,000 at 11% to help finance the project. In addition, Sunfish had outstanding borrowings of $2 million at
7% and $1 million at 8%.
Required:
1 Compute the amount of interest to be capitalized related to the construction of the building.
2 Next Level: What effect does the interest capitalization have on the company's financial statements after it completes the building?
Chapter 10 Solutions
Intermediate Accounting: Reporting And Analysis
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