Question

Martin Inc. began construction on a building in 2020 and paying a construction company $600,000 in 2020. Martin also had avoidable interest of $30,000 and actual interest of $100,000 in 2020. Martin financed the construction with a $1,000,000, 10% loan specific to the project. The project was completed on September 30, 2021. Additional expenditures in 2021 were as follows:
Feb. 28 $90,000
Apr. 30 180,000
Jul. 1 36,000
Sept. 30 64,000

Required:
Once completed, how much is capitalized in Martin’s Building account? Show all your work.

Answer 1

Answer:

$1,000,00

Explanation:

Amount paid to Construction company = $600,000

Additional expenditures in 2021 are Feb 28 = 90,000, Apr. 30 180,000, Jul. 1 = 36,000, Sept. 30 = 64,000. Avoidable interest Cost = 30,000

So, amount to be capitalized in Martin's Building account = $600,000 + $90,000 + $180,000 + $36,000 + $64,000 + $30,000 = $1,000,000