FINANCIAL ACCOUNTING
10th Edition
ISBN: 9781259964947
Author: Libby
Publisher: MCG
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Transcribed Image Text:Interest During Construction
Matrix Inc. borrowed $1,100,000 at 8% to finance the construction of a new building for its own use. Construction began on January 1, 2019, and
was completed on October 31, 2019. Expenditures related to this building were:
January 1 $258,000 (includes cost of purchasing land of $150,000)
May 1
310,000
July 1
450,000
October 31 280,000
In addition, Matrix had additional debt (unrelated to the construction) of $500,000 at 9% and $800,000 at 10%. All debt was outstanding for the
entire year.
Required:
1. Compute the amount of interest capitalized related to the construction of the building.
24
42,000 x
2. If the expenditures are assumed to have been incurred evenly throughout the year:
Compute weighted average accumulated expenditures
654,000 x
Compute the amount of interest capitalized on the building
52,320 x
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