Question

In January of 20X1, the Falwell Company began construction of its own manufacturing facility. During 20X1, $6,000,000 in costs were incurred evenly throughout the year. Falwell took out a $2,500,000, 10% construction loan at the beginning of the year. The company had no other interest-bearing debt. What amount of interest should Falwell capitalize in 20X1?

Answer 1

$250,000

Step-by-step explanation:

The computation of the interest capitalized is shown below:

= Amount of construction loan × given percentage

= $2,500,000 × 10%

= $250,000

We simply multiplied the construction loan amount with the given percentage so that the accurate amount can come.

All other information which is given is not relevant. Hence, ignored it