On January 1, 2013, the Marjlee Company began construction of an office building

Question

On January 1, 2013, the Marjlee Company began construction of an office building to be used as its corporate headquarters. The building was completed early in 2014. Construction expenditures for 2013, which were incurred evenly throughout the year, totaled $5,400,000. Marjlee had the following debt obligations which were outstanding during all of 2013:

Calculate the amount of interest capitalized in 2013 for the building using the specific interest method.

On January 1, 2013, the Marjlee Company began construction of an office building to be used as its corporate headquarters. The building was completed early in 2014. Construction expenditures for 2013, which were incurred evenly throughout the year, totaled $5,400,000. Marjlee had the following debt obligations which were outstanding during all of 2013:

Explanation / Answer

interest on loan, the loan amount is $1,640,000 @9% interest

= $1,640,000* 0.09= $147,600

interest on long term note @ 8% interest

= $2,700,000*0.08= $216,000

interest on long term note @4% interest

= $2,700,000*0.04= $108,000

the total interest for the year of 2013 is= 147,600+216,000+108,000= $471,600

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