Cooper, Inc.is constructing a building that qualifies for interest capitalization.The following information is available:
Capitalization period: January 1, 2010-December 31, 2011 Expenditures on project (incurred evenly):
$2010$20,0002011$60,000\begin{array}{ll}2010 & \$ 20,000 \\2011 & \$ 60,000\end{array}$ Amounts borrowed and outstanding (all debt incurred January 1, 2010):
$\begin{array}{ll}\$ 10,000 & \text { at } 10 \% \text { (specifically for the construction project) } \\\$ 18,000 & \text { at } 12 \% \text { (general debt) } \\\$ 30,000 & \text { at } 14 \% \text { (general debt) }\end{array}$ Required:
a. Compute the amount of interest that should be capitalized in 2010 and 2011 . (Round interest rates to the ne arest hundredths e.g., $\%$ .)
b. Assume that in 2010 umused borowed funds were invested and eaned interest revemue amounting to $\$ 600$ . How much interest should be capitalized to the asset account in 2011 ?

Question

Cooper, Inc.is constructing a building that qualifies for interest capitalization.The following information is available:
Capitalization period: January 1, 2010-December 31, 2011 Expenditures on project (incurred evenly):

2010$20,0002011$60,000\begin{array}{ll}2010 & \$ 20,000 \\2011 & \$ 60,000\end{array}

Amounts borrowed and outstanding (all debt incurred January 1, 2010):

\begin{array}{ll}\$ 10,000 & \text { at } 10 \% \text { (specifically for the construction project) } \\\$ 18,000 & \text { at } 12 \% \text { (general debt) } \\\$ 30,000 & \text { at } 14 \% \text { (general debt) }\end{array}

Required:
a. Compute the amount of interest that should be capitalized in 2010 and 2011 . (Round interest rates to the ne arest hundredths e.g.,

\%

.)
b. Assume that in 2010 umused borowed funds were invested and eaned interest revemue amounting to

\$ 600

. How much interest should be capitalized to the asset account in 2011 ?

Ashlie Elizabeth · Accepted Answer

Final Answer :  a.2010:   $ 1 , 000  \$ 1,000  $1 , 000  , as computed below.2011:   $ 6 , 433  \$ 6,433  $6 , 433  , as compute d below. b.   $ 1 , 0000 \quad \$ 1,0000 $1 , 0000

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