Robert Sporting Goods Company constructed a building that qualified for interest capitalization. The construction began at the beginning of the 2020 and was completed at the end of the year.
The construction cost totaled $10 200 000 and the weighted average accumulated expenditure associated with the asset was $6 800 000.
Robert Sporting Goods Company had outstanding notes payable during the entire year of construction comprising $6 000 000 8% interest and $9 000 000 9% interest. None of these borrowings were specified for the construction of the qualified asset.
Required:
Complete the following schedules to calculate the following for 2020:
i) Actual interest
ii) Capitalization rate
iii) Avoidable interest
iv) Capitalized interest
v) Interest expensed
vi) Capitalized cost of the building
Principal ($)
Interest ($)
8% Note Payable
Answer
9% Note Payable
Total
2020:
i. Actual interest
$Answer
ii. Capitalization rate
Answer%
iii. Avoidable interest
iv. Capitalized interest
v. Interest expensed
vi. Capitalized cost of the building
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