On January 3, 2010, Mercury Company began self-constructing an asset that qualified for interest capitalization.On January 5, Mercury borrowed $300, 000 on an 8% construction loan.In addition, Mercury had $400, 000 of 6% notes payable and $700, 000 of 9% bonds payable outstanding.By December 31, expenditures (occurring evenly throughout the year)of $800, 000 had been made on the asset.Investment of unused funds during the year yielded $1, 200 of interest revenue.
Required:
Compute the amount of interest that should be capitalized during 2010.

Question

Asyifah Ramadhanti · Accepted Answer

Final Answer :  $31, 910, computed as follows:   ( 0 + $ 800 , 000 ) / 2 = $ 400 , 000 $ 400 , 00 0 ′ 06 = $ 24 , 000 $ 700 , 00 0 ′ 09 = 63 , 000 $ 87 , 000 $ 87 , 000 / $ 1 , 100 , 000 = 7.91 % $ 300 , 00 0 ′ . 08 = $ 24 , 000 $ 100 , 00 0 ′ 0791 = 7 , 910 $ 31 , 910 \begin{array}{lr}(0+\$ 800,000) / 2= & \$400,000\\\$ 400,000  '  06= & \$24,000\\$ 700,000  '  09=  & 63,000\ & \$87,000\\\$ 87,000 / \$ 1,100,000=7.91 \%\\\$ 300,000  '  .08=  &  \$ 24,000 \\$ 100,000  '  0791=  &  7,910\ & \$31,910\end{array} ( 0 + $800 , 000 ) /2 = $400 , 00 0 ′ 06 = $700 , 00 0 ′ 09 = $87 , 000/$1 , 100 , 000 = 7.91% $300 , 00 0 ′ .08 = $100 , 00 0 ′ 0791 = ​ $400 , 000 $24 , 000 63 , 000 $87 , 000 $24 , 000 7 , 910 $31 , 910 ​

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