per, Inc., is constructing a building that qualifies for interest capitalization. The following information is available: Capitalization period: January 1, 2013-December 31, 2014 Expenditures on project (incurred evenly): 2013 $30,000 2014 $50,000 Amounts borrowed and outstanding (all debt incurred January 1, 2013) $10,000 at 10% (specifically for the construction project) $18,000 at 11% (general debt) $30,000 at 13% (general debt) Assume that in 2013 unused borrowed funds were invested and earned interest revenue amounting to $800. How much interest now should be capitalized to the asset account in 2013? a. $1,000 b. $1,500 c. $1,612.50 d. $1,812.50
per, Inc., is constructing a building that qualifies for interest capitalization. The following information is available: Capitalization period: January 1, 2013-December 31, 2014 Expenditures on project (incurred evenly): 2013 $30,000 2014 $50,000 Amounts borrowed and outstanding (all debt incurred January 1, 2013) $10,000 at 10% (specifically for the construction project) $18,000 at 11% (general debt) $30,000 at 13% (general debt) Assume that in 2013 unused borrowed funds were invested and earned interest revenue amounting to $800. How much interest now should be capitalized to the asset account in 2013? a. $1,000 b. $1,500 c. $1,612.50 d. $1,812.50
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Cooper, Inc., is constructing a building that qualifies for interest capitalization. The following information is available:
Capitalization period: January 1, 2013-December 31, 2014
Expenditures on project (incurred evenly):
2013 $30,000
2014 $50,000
Amounts borrowed and outstanding (all debt incurred January 1, 2013)
$10,000 at 10% (specifically for the construction project)
$18,000 at 11% (general debt)
$30,000 at 13% (general debt)
Assume that in 2013 unused borrowed funds were invested and earned interest revenue amounting to $800. How much interest now should be capitalized to the asset account in 2013?
a. $1,000
b. $1,500
c. $1,612.50
d. $1,812.50
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