Question

In January of 2009, the Falwell Company began construction of its own manufacturing facility. During 2009, $6,000,000 in costs were incurred evenly throughout the year. Falwell took out a $2,500,000, 10% construction loan at the beginning of the year. The company had no other interest-bearing debt. What amount of interest should Falwell capitalize in 2009

Answer 1

Answer:

$250,000

Explanation:

Calculation of the amount of interest should Falwell capitalize in 2009

Based on the information given we were told that the company took out the amount of $2,500,000, 10% of the construction loan at the start of the year. Therefore the amount of interest that Falwell should capitalize in 2009 will be calculated as:

Interest = $2,500,000*10%

Interest =$250,000

Therefore the amount of Falwell interest should be $250,000