Question

g Cole Co. began constructing a building for its own use in January 2021. During 2021, Cole incurred interest of $50,000 on specific construction debt, and $20,000 on other borrowings. Interest computed on the weighted-average amount of accumulated expenditures for the building during 2021 was $40,000. What amount of interest should Cole capitalize

Answer 1

Answer: $40,000

Explanation:

Interest that is accrued as a result of a building should be capitialized to the cost of that building. The amount of interest payment that is due to the building will simply be the interest payment that the company would have avoided incurring had it not undertaken the construction of the building.

This amount is represented by the interest computed on the weighted-average amount of accumulated expenditures which in this case is $40,000 so that is the amount that should be capitalized by Cole Co.