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On January 1, 2015 Costco began construction of a new warehouse in Redmond, WA. The building was completed on June 30, 2016. Cash outlays for
- On January 1, 2015 Costco began construction of a new warehouse in Redmond, WA. The building was completed on June 30, 2016. Cash outlays for the $5 million project were as follows:
2015
January 1 $1,000,000
March 1 $600,000
June 30 $800,000
September 30 $750,000
December 1 $600,000
2016
March 31 $800,000
June 30 $450,000 (final payment)
Total payments $5,000,000
On January 1, 2015 Costco obtained a $3 million dollar construction loan with a 5% interest rate. Costcos other long-term debt consisted of $30 million 6% bonds and $20 million of 8% bonds. All debt was outstanding throughout 2015 and 2016.
- Calculate the amount of interest to be capitalized in 2015.
- Calculate the amount of interest to be capitalized in 2016.
- What is the final total capitalized cost of the warehouse?
- How much interest expense is reported in Costcos Income Statement for both 2015 and 2016?
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