Construction began on January 1, 2019 and the building was completed on December 31, 2020. January 1,
Question:
Construction began on January 1, 2019 and the building was completed on December 31, 2020.
January 1, 2019 $1,400,000 | January 1, 2020 $3,000,000 |
March 31, 2019 $900,000 | April 30, 2020 $900,000 |
June 30, 2019 $800,000 | September 30, 2020 $800,000 |
July 31, 2019 $600,000 | Building complete December 31, 2020 |
September 1, 2019 $750,000 |
On January 1, 2019, ALMO obtained a $8,000,000 construction loan with a 5% interest rate. The loan was outstanding for 2019 and 2020. The company’s other interest-bearing debt included two long-term notes of $4,000,000 and $4,000,000 with interest rates of 8% and 7%, respectively. Both notes were outstanding during all of 2019 and 2020. Interest is paid annually on all debt. The company’s fiscal year end is December 31.
Question
Using the information above, if the average approach is used the amount of interest capitalized for 2019 should be? (round to the closest whole dollars with no dollar sign but include commas).
Intermediate Accounting IFRS
ISBN: 978-1119372936
3rd edition
Authors: Donald E. Kieso, Jerry J. Weygandt, Terry D. Warfield