Answer:
Sunland Company
The amount of interest cost to be capitalized during 2020 is:
= $948,000.
Explanation:
a) Data and Calculations:
Cost of purchased land = $2,680,000
Construction expenditures:
Date Expenditures:
January 1, 2020 $ 1,780,000
April 1, 2020 2,530,000
May 1, 2020 4,490,000
June 1, 2020 4,720,000
Total expenditure $13,520,000
Weighted-average accumulated expenditures = $4,300,000
Debts:
January 1, 2020, 9%, 3-year note payable = $3,650,000
January 1, 2020, 12%, 6-year note payable balance = $1,400,000
Interests capitalization:
Weighted-average accumulated expenditures = $451,500 ($4,300,000 * 10.5%)
3-year note payable = $328,500 ($3,650,000 * 9%)
6-year note payable balance = $168,000 ($1,400,000 * 12%)
Total interest to be capitalized = $948,000
