Question
On January 1, 2021, Firm ABC began constructing a new warehouse. The warehouse was finished and ready for use on December 31, 2021. Expenditures on
On January 1, 2021, Firm ABC began constructing a new warehouse. The warehouse was finished and ready for use on December 31, 2021. Expenditures on the project were as follows:
| Date of Expenditure | Expenditure Amount |
| January 1, 2021 | $ 205,000 |
| October 1, 2021 | $ 360,000 |
To finance the project, Firm ABC took out a $350,000 construction loan with a stated interest rate of 7%. The construction loan was outstanding throughout the construction period. In addition, Firm ABC had $50,000 in bonds payable with a stated interest rate of 4% outstanding during 2021.
The amount of interest capitalized for 2021 was:
| a. | $22,855 | |
| b. | $24,500 | |
| c. | $19,705 | |
| d. | $20,650 |
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Accounting Understanding And Practice
Authors: Robert Perks
4th Edition
0077139135, 978-0077139131
