Interest During Construction

Snowbird Company is constructing a building that qualifies for interest capitalization. It is built between January 1 and December 31, 2019. Snowbird made the following expenditures related to this building:

April 1	$396,000
July 1	400,000
September 1	510,000
December 1	120,000

The company borrowed $500,000 at 12% to help finance the project. In addition, Snowbird had outstanding borrowings of $2 million at 8% and $1 million at 9%.

Required:

Compute the amount of interest capitalized related to the construction of the building. Do not round your interim calculations. Round your final answer to the nearest dollar.

$ fill in the blank 1

Next Level In the current period, the capitalization of interest

decreases shareholders' equity decreases the cost of the building increases expenses increases net income decreases the cost of the building

; in the future period the effect of capitalized interest is to

decreases depreciation expense decreases shareholders' equity increases net income decreases shareholders' equity

.