AR
Answered
On January 3, 2010, Mercury Company began self-constructing an asset that qualified for interest capitalization.On January 5, Mercury borrowed $300, 000 on an 8% construction loan.In addition, Mercury had $400, 000 of 6% notes payable and $700, 000 of 9% bonds payable outstanding.By December 31, expenditures (occurring evenly throughout the year)of $800, 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 2010.
On May 15, 2024
$31, 910, computed as follows: (0+$800,000)/2=$400,000$400,000′06=$24,000$700,000′09=63,000$87,000$87,000/$1,100,000=7.91%$300,000′.08=$24,000$100,000′0791=7,910$31,910\begin{array}{lr}(0+\$ 800,000) / 2=&\$400,000\\\\\$ 400,000 ' 06=&\$24,000\\\$ 700,000 ' 09= &63,000\\&\$87,000\\\\\$ 87,000 / \$ 1,100,000=7.91 \%\\\\\$ 300,000 ' .08= & \$ 24,000 \\\$ 100,000 ' 0791= & 7,910\\&\$31,910\end{array}(0+$800,000)/2=$400,000′06=$700,000′09=$87,000/$1,100,000=7.91%$300,000′.08=$100,000′0791=$400,000$24,00063,000$87,000$24,0007,910$31,910