Early in 2020, FiveGenWoodShop engaged Big Building, Inc. to design and construct a manufacturing facility. Construction began
Question:
Early in 2020, FiveGenWoodShop engaged Big Building, Inc. to design and construct a manufacturing facility. Construction began on March 1, 2020 and completed on October 31, 2020. FiveGenWoodShop made the following payments to Big Building during 2020:
Date Payment March 30, 2020 $ 800,000
June 30, 2020 1,200,000
July 30, 2020 1,200,000 September 1, 2020 600,000
FiveGenWoodShop didn’t borrow specifically for the construction project, but did have the following debt outstanding during 2020: 1) $600,000 of 10-year, 8% notes payable; and 2) $200,000 of 20-year, 5% notes payable.
a. What is the total amount of interest to be capitalized by FiveGenWoodShop during 2020 related to this construction?
b. What is the total amount of interest expense on the FiveGenWoodShop 2020 income statement related to this construction?
c. What is the total amount of Gross PPE on the FiveGenWoodShop balance sheet as a result of this construction as of 12/31/2020?
Expert Answer:
Construction Begins March12020 Amount Interest Rate Annual Interest cost Other borrowing 600000 8 48... View the full answer
