Question
34. On January 1, 2013, Right Company signed a contract to have Bozy Associates construct a manufacturing facility at a cost of $8,000,000. It
34. On January 1, 2013, Right Company signed a contract to have Bozy Associates construct a manufacturing facility at a cost of $8,000,000. It was estimated that it would take three years to complete the project. Also on January 1, 2013, to finance the construction cost, Right borrowed $8,000,000 payable in ten annual installments of $800,000, plus interest at the rate of 12%. During 2013, Right made progress payments totaling $2,000,000 under the contract; the average amount of accumulated expenditures was $900,000 for the year. The excess borrowed funds were invested in short-term securities, from which Right realized investment income of $130,000. What amount should Right report as capitalized interest at December 31, 20137 $ 88,000 b. $220,000 c. $108,000 d. $880,000
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