Hilary Corp. contracted with a company to build a storage warehouse in Year $1.$ Construction began in April $1$ at which time Hilary Corp. paid $$65,000.$ Hilary Corp. then made additional payments as follows, based on progress made towards completion of the structure:

June $1$ $$75,000$

September $1$ $$90,000$

December $1$ $$50,000$

Hilary Corp. borrowed $$95,000$ in January $1$ specifically for this project at $8\%$ interest. Hilary had the following non$$specific borrowings $($i$.$e$.,$ general borrowings$)$ outstanding during the year:

$15\%$ $$2\mathrm{.}5$ million loans

$7\mathrm{.}5\%$ $ $500,000$ loan

  

 

a$.$ How much interest should be capitalized on this building?

b$.$ What is the amount of interest expense that will appear on Hilary$$s Year $1$ income statement?

Answer rating: 100% (QA)

To calculate the interest capitalized on the building well first determine the weight... View the full answer