Question
Doggy Co. began construction of a new cutter for the U.S. Coast Guard on January 1, 2018 and completed construction of the ship on October
Doggy Co. began construction of a new cutter for the U.S. Coast Guard on January 1, 2018 and completed construction of the ship on October 31, 2019. To finance construction, Doggy took out an $8,000,000, 2-year, 6% construction loan on February 1, 2018. Interest on the loan was to be paid annually on the anniversary date of the loan. Doggy has no other outstanding interest-bearing debt. Doggy made the following expenditures in conjunction with this construction project:
Date | Amount | ||
2/1/2018 | $ | 1,050,000 | |
3/31/2018 | 900,000 | ||
6/1/2018 | 750,000 | ||
10/1/2018 | 1,000,000 | ||
12/31/2018 | 600,000 | ||
3/1/2019 | 900,000 | ||
9/1/2019 | 250,000 | ||
A) What is the amount of Doggys cumulative weighted average expenditures during 2018 related to the cutter project?
B) How much interest should Doggy capitalize in 2018 related to the cutter project?
C) How much interest should Doggy expense in 2018?
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