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Carver Department Stores, Inc., constructs its own stores. In the past, no cost has been added to the asset value for interest on funds borrowed
Carver Department Stores, Inc., constructs its own stores. In the past, no cost has been added to the asset value for interest on funds borrowed for construction. Management has decided to correct its policy and desires to include interest as part of the cost of a new store just being completed. Based on the following information, how much interest would be added to the cost of the store 1. in 2015 and Answer check Figure: Total capitalized interest for 2015 $91,792 2. in 2016? Total construction expenditures: 500,000 January 2, 2015 May 1, 2015. 450,000 November 1, 2015 700,000 March 1,2016 950.000 September 1, 2016 800,000 November 30, 2016. Outstanding company debt Mortgage related directly to new store: interest rate, 10% term. five years from beginning of construction. $1,500,000 General bond liability: Bonds issued just prior to construction of store: interest rate, s 500000 896 for 10 years. Bonds issued prior to construction; interest rate, 12% mature in five years S 800000 Estimated cost of equity capital
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