Question
On January 3, 2020, Mercury Company began self-constructing an asset that qualified for interest capitalization. On January 5, Mercury borrowed $300,000 on an 9% construction
On January 3, 2020, Mercury Company began self-constructing an asset that qualified for interest capitalization. On January 5, Mercury borrowed $300,000 on an 9% construction loan. In addition, Mercury had $400,000 of 6.75% notes payable and $600,000 of 9.5% bonds payable outstanding. By December 31, expenditures (occurring evenly throughout the year) of $900,000 had been made on the asset. Investment of unused funds during the year yielded $1,200 of interest revenue.
Required: Compute the amount of interest that should be capitalized during 2020.
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