Grand Rapids Co. has a fiscal year ending on April 30. On May 1, 2010, Grand Rapids borrowed $10,000,000 at 11% to finance construction of its own building. Repayments of the loan are to commence the month following completion of the building. During the year ended April 30, 2011, expenditures for the partially completed building totaled $6,000,000, These expenditures were incurred evenly throughout the year. Actual interest incurred by Grand Rapids on its debt during the year was $1,500,000.
How much interest should be capitalized on the financial statements of Grand Rapids at April 30, 2011? Show work.
Grand Rapids also incurred the following costs during the year ended April 30, 2011 in connection with its research and development activities.
Cost of equipment acquired on May 1, 2011 that will have alternative uses in future R&D projects over the next 5 years (straight-line depreciation used) $330,000
- Materials consumed in R&D projects 59,000
- Consulting fees paid to outsiders for R&D projects 100,000
- Personnel costs of employees involved in R&D projects 128,000
- Indirect costs reasonably allocable to R&D projects 50,000
- Materials purchased for future R&D projects 34,000
Determine the amount to be reported as research and development expense by Grand Rapids on its income statement for the year ended April 30, 2011.