10-year, 13% bond, December 31, 2013,
Intermediate Accounting: Reporting And Analysis
3rd Edition
ISBN:9781337788281
Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Chapter10: Property, Plant And Equipment: Acquisition And Subsequent Investments
Section: Chapter Questions
Problem 18E
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On December 31, 2019, Main Inc. borrowed $3,000,000 at 12% payable annually to finance the construction of a new building. In 2020, the company made the following expenditures related to this building: March 1, $360,000; June 1, $600,000; July 1, $1,500,000; December 1, $1,500,000. The building was completed in February 2021. Additional information is provided as follows.
| 1. | Other debt outstanding | |||
| 10-year, 13% bond, December 31, 2013, interest payable annually | $4,000,000 | |||
| 6-year, 10% note, dated December 31, 2017, interest payable annually | $1,600,000 | |||
| 2. | March 1, 2020, expenditure included land costs of $150,000 | |||
| 3. | Interest revenue earned in 2020 | $49,000 |
(a)
Determine the amount of interest to be capitalized in 2020 in relation to the construction of the building.
| The amount of interest |
$
|
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