Reference no: EM131259774
Place Company started construction of a new office building on January 1, 2014, and moved into the finished building on July 1, 2015. Of the building's $5,000,000 total cost, $4,000,000 was incurred in 2014 evenly throughout the year. Place's incremental borrowing rate was 12 percent throughout 2014, and the total amount of interest incurred by Place during 2014 was $204,000. What amount should Place report as capitalized interest at December 31, 2014? a. $480,000 b. $300,000 c. $240,000 d. $204,000 2.Song Company started construction on a building on January 1 of this year and completed construction on December 31 of the same year. Song had only two interest notes outstanding during the year, and both of these notes were outstanding for all 12 months of the year. The following information is available: Average accumulated expenditures ..................... $250,000 Ending balance in construction in progress before capitalization of interest .................. 360,000 6 percent note incurred specifically for the project . 150,000 9 percent long-term note ............................. 500,000 What amount of interest should Song capitalize for the current year? a. $15,000 b. $18,000 c. $22,500 d. $27,900
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