Question
Ship-Builders Co. began construction of a new cutter for the U.S. Coast Guard on January 1, 2018 and completed construction of the ship on March
Ship-Builders Co. began construction of a new cutter for the U.S. Coast Guard on January 1, 2018 and completed construction of the ship on March 31, 2019. To help finance construction, Ship-Builders took out an $8,100,000, 2 year, 7% loan on January 1, 2018. Interest on the loan was to be paid annually at the end of each year and the principal at the end. Ship-Builders has no other outstanding interest-bearing debt. Ship-Builders made the following expenditures in conjunction with this construction project.
Date Amount
2/1/2018 $1300000
3/1/2018 $650000
4/1/2018 $600000
8/1/2018 $1100000
10/1/2018 $700000
11/1/2018 $800000
3/11/2019 $2500000
How much interest should Ship-Builders Co. capitalize in 2018? How Much should they expense in 2018?
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