Question

# On January 2, 2020, Oriole Company began construction of a new citrus processing plant. The automated...

On January 2, 2020, Oriole Company began construction of a new citrus processing plant. The automated plant was finished and ready for use on September 30, 2021. Expenditures for the construction were as follows:

Oriole Company borrowed \$3300000 on a construction loan at 10% interest on January 2, 2020. This loan was outstanding during the construction period. The company also had \$13560000 in 7% bonds outstanding in 2020 and 2021.

The interest capitalized for 2020 was:

1. \$482340

2. \$158200

3. \$474600

4. \$120660

 January 2, 2020 \$ 603000 September 1, 2020 1810800 December 31, 2020 1810800 March 31, 2021 1810800 September 30, 2021 1218000

 Answer: Option D is correct. i.e \$120660 Interest Capitalized for 2020 Date Expenditure Weight Average 02-Jan-20 603000 12/12 603000 01-Sep-20 1810800 4/12 603600 31-Dec-20 1810800 0/12 - Accumulated   Expenditures 4224600 1206600 Interest Capitalized for 2020 = 1206600 x 10% = 120660

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