Question
B constructed a warehouse for its own use. B started construction on January 1 and completed construction on December 31. Construction expenditures were as follows:
B constructed a warehouse for its own use. B started construction on January 1 and completed construction on December 31. Construction expenditures were as follows:
$750,000 on January 1
$600,000 on March 1
$400,000 on May 1
$300,000 on September 30
$250,000 on December 31
During the entire year B had the following outstanding notes payable:
A 4.00%, 5-year $9,000,000 note payable
A 3.25%, 8-year $3,000,000 note payable
A 5.00%, 4-year $2,000,000 note payable
a) What were Bs total interest costs for the year?
b) What amount of interest should B capitalize on this construction project?
c) What was Bs interest expense for the year?
When necessary, round any interest rate as follows: 4.873% = 4.9% while 3.314% = 3.3%.
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