Question
Interest During Construction Ventry Company is constructing a production complex that qualifies for interest capitalization. The following information is available: Capitalization period: January 1, 2016,
Interest During Construction
Ventry Company is constructing a production complex that qualifies for interest capitalization. The following information is available:
Capitalization period:
January 1, 2016, to June 30, 2017
Expenditures on project:
2016:
January 1 - $ 564,000
May 1 -537,000
October 1 -528,000
2017:
March 1 - $ 1,536,000
June 30 564,000
Amounts borrowed and outstanding:
$1.7 million borrowed at 10%, specifically for the project
$4 million borrowed on July 1, 2015, at 12%
$16 million borrowed on January 1, 2011, at 6%
Required:
Note: Round all final numeric answers to the nearest dollar.
1. Compute the amount of interest costs capitalized each year.
Capitalized interest, 2016 -$
Capitalized interest, 2017 - $
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 2017.
$
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