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Interest During Construction Alta Company is constructing a production complex that qualifies for interest capitalization. The following information is available: Capitalization period: January 1 ,
Interest During Construction
Alta Company is constructing a production complex that qualifies for interest capitalization. The following information is available:
Capitalization period: January to June
Expenditures on project:
:
January $
May
October
:
March
June
Amounts borrowed and outstanding:
$ million borrowed at specifically for the project
$ million borrowed on July at
$ million borrowed on January at
Required:
Note: Round all final numeric answers to two decimal places.
Compute the amount of interest costs capitalized each year.
Capitalized interest, $ fill in the blank
Capitalized interest, $ fill in the blank
If it is assumed that the production complex has an estimated life of years and a residual value of $ compute the straightline depreciation in
$ fill in the blank
Since GAAP requires accrual accounting, if a company capitalizes interest during the construction period it will report
income than if it had not capitalized interest. In future periods, the same company will report
income than if it had not capitalized interest.
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