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Compute the amount of interest revenue Kit would recognize

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Problem - Calculating Capitalized Interest - Kit Company borrows $6 million at 12% on January 1, 2019, specifically for the purpose of financing the construction of a building that is expected to take 18 months to complete. Kit invests the total amount at 11% until it makes payments for the construction project. During the first year of construction, Kit incurs the following expenditures related to this construction project:

January 1 $1,000,000

April 1 1,600,000

October 1 1,200,000

December 31 500,000

Required -

Compute the amount of interest expense Kit would capitalize related to the construction of the building.

Compute the amount of interest revenue Kit would recognize.

Assume that Kit uses IFRS. What amount of interest would be capitalized related to the construction of the building?

Reference no: EM132885403

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