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During year 8, Clark Company manufactured equipment for its own use at a total cost of $2,400,000. The project required the entire year to complete

During year 8, Clark Company manufactured equipment for its own use at a total cost of $2,400,000. The project required the entire year to complete and all costs were incurred uniformly throughout the year. At the beginning of the period, Clark was able to borrow $1,500,000 at 6% specifically for the purchase of materials and the manufacture of the equipment. The entire debt, with interest was repaid on December 31, year 8, replaced with a long-term loan. Throughout year 8, Clark Company had additional debt of $1,000,000 with a weighted average interest rate of 7%. If Clark Company capitalizes the maximum amount of interest allowable under GAAP, how much will Clark report as interest expense in year 8?

Multiple Choice

  • $160,000

  • $153,000

  • $88,000

  • $72,000

    Incorrect

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