Question

On January 1, 2018, the Highlands Company began construction on a new manufacturing facility for its own use. The building was completed in 2019. The company borrowed $2,200,000 at 8% on January 1 to help finance the construction. In addition to the construction loan, Highlands had the following debt outstanding throughout 2018:

$9,000,000, 10% bonds

$6,000,000, 8% long-term note

Construction expenditures incurred during 2018 were as follows:

January 1	$	900,000
March 31		1,500,000
June 30		1,160,000
September 30		900,000
December 31		700,000

Required:
Calculate the amount of interest capitalized for 2018 using the specific interest method. (Do not round the intermediate calculations. Round your percentage answers to 1 decimal place (i.e. 0.123 should be entered as 12.3%).)

Answer 1

Hi

Let me know in case any issue and query:

Interest is capitalized for the period of manufacturing of capital asset.