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During 2020, Bass Corporation constructed assets costing $4,000,000. The weighted-average accumulated expenditures on these assets during 2020 was $2,400,000. To help pay for construction, $1,760,000 was borrowed at 10% on January 1, 2020, and funds not needed for construction were temporarily invested in short-term securities, yielding $36,000 in interest revenue. Other than the construction funds borrowed, the only other debt outstanding during the year was a $2,000,000, 10-year, 9% note payable dated January 1, 2014. What is the amount of interest that should be capitalized by Bass during 2020?

Respuesta :

Answer:

$233,600

Explanation:

The computation of the interest capitalized is shown below:

= Construction cost × borrowed rate + {(weighted-average accumulated expenditures - Construction cost) × note payable interest rate}

= $1,760,000 × 10% + {($2,400,000 - $1,760,000) × 9%}

= $176,000 + $640,000 × 9%

=  $176,000 + $57,600

=  $233,600

All other information which is given in the question is not relevant. Hence, ignored it

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