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On January 1, 2021, Kendall Inc. began construction of an automated cattle feeder system. The system was finished and ready for use on September 30, 2022. Expenditures on the project were as follows:

January 1, 2021 $ 290,000
September 1, 2021 $ 408,000
December 31, 2021 $ 408,000
March 31, 2022 $ 408,000
September 30, 2022 $ 290,000

Kendall borrowed $762,000 on a construction loan at 12% interest on January 1, 2021. This loan was outstanding throughout the construction period. The company had $4,560,000 in 12% bonds payable outstanding in 2021 and 2022.

Interest capitalized for 2021 was: _____________

User Astha Garg
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2 Answers

6 votes

Answer:

$392,500

Step-by-step explanation:

User Angel Politis
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3.5k points
3 votes

Answer:

$91,440

Step-by-step explanation:

Interest capitalized on construction loan shall be

=762,000+*12%

=$91,440

The interest of the specific loan obtained for construction will be capitalized in 2021.

User David Bendahan
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