Agasse Industries began construction of a new facility and took out a $1,500,000
ID: 2487539 • Letter: A
Question
Agasse Industries began construction of a new facility and took out a $1,500,000, 8% construction loan on January 1, 2011. The construction is completed on September 30, 2011. Agasse made payments to the general contractor as follows:
$360,000 on January 1, 2011
$900,000 on June 1, 2011
$540,000 on August 1, 2011
Required:
(1) The capitalized interest for the new facility that Agasse will report in 2011 is $______
Hints: show the three steps -average accumulated expensiture for the construction, calculated capitalized interst, actual interest cost
(2) The acquisition costs for the new facility that Agassee will report in its balance sheet in 2011 is $______
Explanation / Answer
Agassee Industries (1) Capitalised Interest to be reported for 2011 Date of Payment Amount Date of No. of days Interest Interest completion Rate Amount 01/01/2011 360000 30/09/2011 273 8% 21541 01/06/2011 900000 30/09/2011 122 8% 24066 01/08/2011 540000 30/09/2011 61 8% 7220 Total 52826 (2) Acquisition Costs reported by Agassee in 2011 Total expenditure incurred till date 1800000 Interest on Capitalisation 52826.3 Total reported in assets 1852826 Total Loan from Bank - reported as Liability 1500000