Early in 2014 dobbs corporation engaged kiner inc to design

Reference no: EM13589457

Early in 2014, Dobbs Corporation engaged Kiner, Inc. to design and construct a complete modernization of Dobbs's manufacturing facility. Construction was begun on June 1, 2014 and was completed on December 31, 2014. Dobbs made the following payments to Kiner, Inc. during 2014:

Date Payment

June 1, 2014 $6,000,000

August 31, 2014 9,000,000

December 31, 2014 7,500,000

In order to help finance the construction, Dobbs issued the following during 2014:

1. $5,000,000 of 10-year, 9% bonds payable, issued at par on May 31, 2014, with interest payable annually on May 31.

2. 1,000,000 shares of no-par common stock, issued at $10 per share on October 1, 2014.

In addition to the 9% bonds payable, the only debt outstanding during 2014 was a $1,250,000, 12% note payable dated January 1, 2010 and due January 1, 2020, with interest payable annually on January 1.

Instructions: Determine the amount of interest cost to be capitalized during 2014. Be sure to show supporting computations.

Reference no: EM13589457

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