Interest capitalization
Response to the following problem:
On January 1, 2016, the Shagri Company began construction on a new manufacturing facility for its own use. The building was completed in 2017. The only interest-bearing debt the company had outstanding during 2016 was long-term bonds with a book value of $10,000,000 and an effective interest rate of 8%. Construction expenditures incurred during 2016 were as follows:
January 1 $500,000
March 1 600,000
July 31 480,000
September 30 600,000
December 31 300,000
Required:
Calculate the amount of interest capitalized for 2016.