Interest During Construction

Alta Company is constructing a production complex that qualifies for interest capitalization. The following information is available:

Capitalization period: January 1, 2019, to June 30, 2020

Expenditures on project:

2019:
	January 1	$ 624,000
	May 1	549,000
	October 1	696,000
2020:
	March 1	1,536,000
	June 30	684,000

Amounts borrowed and outstanding: $1.6 million borrowed at 10%, specifically for the project $5 million borrowed on July 1, 2018, at 12% $11 million borrowed on January 1, 2017, at 6%

Required:

Note: Round all final numeric answers to two decimal places.

Compute the amount of interest costs capitalized each year.

Capitalized interest, 2019	$ fill in the blank 1
Capitalized interest, 2020	$ fill in the blank 2

If it is assumed that the production complex has an estimated life of 20 years and a residual value of $0, compute the straight-line depreciation in 2020.

$ fill in the blank 3

Since GAAP requires accrual accounting, if a company capitalizes interest during the construction period it will report

higherlowerthe same amount of

income than if it had not capitalized interest. In future periods, the same company will report

higherlowerthe same amount of

income than if it had not capitalized interest.