PP&E Question

  • Creator
    Topic
  • #196275
    Kairos
    Participant

    the answer is d) but i’m having trouble following the explanation. can anyone walk me through this one?

    thanks!

    Sylvester Co. takes out a 12% loan of $500,000 on 1/1/2014 to finance construction of a building for the company’s own use. Construction begins immediately, and $600,000 is spent on the construction at an even pace during 2014. Another $400,000 is spent at an even pace during 2015, with construction completed on 12/31/2015. No other construction loans are taken out. Sylvester incurred unrelated interest expenses of $10,000 and $15,000 in 2014 and 2015, respectively, on loans that bear interest at 10%. How much interest can Sylvester capitalize in 2014 and 2015?

    2014 2015

    a

    $60,000 $96,000

    b

    $36,000 $96,000

    c

    $60,000 $60,000

    d

    $36,000 $75,000

  • You must be logged in to reply to this topic.