Reference no: EM132674418
At the end of 2017, Tractor Company purchase a tract of land for $100,000 as a building site. On Jan 1, 2018, Tractor Co obtained an $800,000 loan with a 6% interest rate. The company's other interest bearing debt included two long term notes of $1m and $3m with interest rates 12% and 8% respectively.
2018 construction expenditures:
date payment
Jan 1. $100,000
May 1. $ 1,200,000
July 31. $ 1,500,000
Sep 1. $750,000
The new office building became ready for use on Dec 31, 2018.
Problem 1: Calculate the amount of interest that Omicron should capitalize in 2018.
Problem 2: What is the total value of the building at Dec 31, 2018?
Problem 3: How much interest expense will Omicron recognize in its 2018 income statement?
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