The company borrowed $762,000 on a construction loan at 12% interest on January 1, 2024. This loan was outstanding throughout the construction period. The company had $4,560,000 in 12% bonds payable outstanding in 2024 and 2025.

CONCEPTS IN FED.TAX.,2020-W/ACCESS
20th Edition
ISBN:9780357110362
Author:Murphy
Publisher:Murphy
Chapter9: Acquisitions Of Property
Section: Chapter Questions
Problem 46P
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On January 1, 2024, a company began construction of an automated cattle feeder system. The system was finished and ready for use on September 30, 2025. Expenditures on the project were as follows:

January 1, 2024 $ 248,000
September 1, 2024 $ 336,000
December 31, 2024 $ 336,000
March 31, 2025 $ 336,000
September 30, 2025 $ 248,000

The company borrowed $762,000 on a construction loan at 12% interest on January 1, 2024. This loan was outstanding throughout the construction period. The company had $4,560,000 in 12% bonds payable outstanding in 2024 and 2025.

Interest (using the specific interest method) capitalized for 2025 was:

Multiple Choice

$106,848.

$124,668.

$68,580.

$107,918.

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