Question

On January 1, 2018, Dreamworld Co. began construction of a new warehouse. The building was finished...

On January 1, 2018, Dreamworld Co. began construction of a new warehouse. The building was finished and ready for use on September 30, 2019. Expenditures on the project were as follows:

January 1, 2018

$

300,000

September 1, 2018

$

450,000

December 31, 2018

$

450,000

March 31, 2019

$

450,000

Dreamworld had the following debt obligations outstanding during both years:

Construction loan, 10%             $500,000

             Long-term note, 12%                      $2,500,000

Required: What would Dreamworld's capitalized interest be in 2019 (assuming interest from 2018 does not compound in 2019)?

$45,000

$161,000

$135,000

$125,000

$113,000

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