Use the following information for the next four questions:

CONVALESCE Co. started construction of a qualifying asset for RECOVER, Inc. on January 1, 20x1. The following were expenditures incurred on construction.

Date Expenditures

Year 20x1

January 1, 20x1 4,000,000

May 1, 20x1 1,800,000

December 1, 20x1 2,880,000

Year 20x2

January 1, 20x2 3,600,000

August 30, 20x2 1,200,000

Year 20x3

July 1, 20x3 2,400,000

COVALESCE Co. determined the capitalization rate to be 10%. The construction of the qualifying asset was substantially completed on September 30, 20x3.

1. How much is the capitalizable borrowing cost in 20x1?
2. How much is the capitalizable borrowing cost in 20x2?
3. How much is the capitalizable borrowing cost in 20x3?
4. How much is the total cost of the constructed qualifying asset on September 30, 20x3?

ANSWERS AND SOLUTION

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