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Topic
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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
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