Question

The following expenditures are made during the current year: January 1, $30,000; July 1, $290,000; September 1, $800,000; and December 31, $2,110,000.

The following debts were outstanding throughout the current year.
Debt Amount Construction note, 12% $100,000
Short-term note payable, 15% 400,000
Accounts payable (noninterest-bearing) 400,000

Compute the amount of interest to be capitalized in 2020.

Answer 1

Construction note 12% $100,000 = $12,000

Short-term note payable, 15% 400,000 = $60,000

Accounts payable (noninterest-bearing) 400,000 = 0

Total interest due at year end = $72,000