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Interest During Construction Ata Company is constructing a production complex that qualities for interest capitation. The following information is available: Capitalization period: January 1, 2019,
Interest During Construction Ata Company is constructing a production complex that qualities for interest capitation. The following information is available: Capitalization period: January 1, 2019, to June 30, 2020 Expenditures on project: 2019: January 1 $ 600,000 May 1 561,000 October 1 684,000 2020 March ! 1,416,000 June 30 660,000 Amounts borrowed and outstanding $1.5 million borrowed at 10%, specifically for the project $6 million borrowed on July 1, 2018, at 12% $13 million borrowed on January 1, 2017, at 6% Required: Note: Round all final numeric answers to two decimal places. 1. Compute the amount of interest costs capitalized each year Capitalized interest, 2019 114,500 Capitalured interest, 2020 $ 70,800 2. If it is assumed that the production complex has an estimated life of 25 years and a residual value of 50, compute the straight-line depreciation in 2020 3. Since GAAP requires accrual accounting, a company capitaltres interest during the construction period it will report company will report Income than if it had not capitalized interest Income than it had not capitalired interest in future periods, the same
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