Question
Ford engaged with an Construction Co. to design and construct a manufacturing facility for its car . Construction started on January 2 and was completed
Ford engaged with an Construction Co. to design and construct a manufacturing facility for its car . Construction started on January 2 and was completed on December 31 of the current year. During the year, Ford paid the following amounts .
Jan. 2 $2m
Aug. 1 $2m
Oct. 1 $4m
Dec. 1 $1m
Total payments = 9m
Ford had outstanding borrowings that were unrelated to the project throughout the year as follows:
$6m of bonds payable with a 6% interest rate
$2m note payable with a 9% interest rate
Ford borrowed $3m from the bank to finance the project. This debt is due in 3 years and has an interest rate of 5%.
1- Compute the amount of interest that needs to be capitalized
2- Compute the amount of interest that would be reported as interest expense for the year.
Assume the specific interest method for both.
Ford engaged with an Construction Co. to design and construct a manufacturing facility for its car . Construction started on January 2 and was completed on December 31 of the current year. During the year, Ford paid the following amounts .
Jan. 2 $2m
Aug. 1 $2m
Oct. 1 $4m
Dec. 1 $1m
Total payments = 9m
Ford had outstanding borrowings that were unrelated to the project throughout the year as follows:
$6m of bonds payable with a 6% interest rate
$2m note payable with a 9% interest rate
Ford borrowed $3m from the bank to finance the project. This debt is due in 3 years and has an interest rate of 5%.
1- Compute the amount of interest that needs to be capitalized
2- Compute the amount of interest that would be reported as interest expense for the year.
Assume the specific interest method for both.
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