Determine the amount of interest to be capitalized


On December 31, 2009, Hurston Inc. borrowed $3,600,000 at 12% payable annually to finance the construction of a new building. In 2010, the company made the following expenditures related to this building: March 1, $432,000; June 1, $720,000; July 1, $1,800,000; December 1, $1,800,000. Additional information is provided as follows.

1. Other debt outstanding
10-year, 11% bond, December 31, 2003, interest payable annually $4,800,000
6-year, 10% note, dated December 31, 2007, interest payable annually $1,920,000
2. March 1, 2010, expenditure included land costs of $180,000
3. Interest revenue earned in 2010 $58,800

(a) Determine the amount of interest to be capitalized in 2010 in relation to the construction of the building.

 

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Accounting Basics: Determine the amount of interest to be capitalized
Reference No:- TGS089162

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