In January of 2018, the Falwell Company began construction of its own manufacturing facility. During 2018, $6,000,000 in costs were incurred evenly throughout the year. Falwell took out a $2,500,000, 10% construction loan at the beginning of the year. The company had no other interest-bearing debt. What amount of interest should Falwell capitalize in 2018? a. $600,000 b. $300,000 c. $250,000d. $0

Question

Mallory Farley

Business

27 September, 01:34

In January of 2018, the Falwell Company began construction of its own manufacturing facility. During 2018, $6,000,000 in costs were incurred evenly throughout the year. Falwell took out a $2,500,000, 10% construction loan at the beginning of the year. The company had no other interest-bearing debt. What amount of interest should Falwell capitalize in 2018? a. $600,000 b. $300,000 c. $250,000d. $0

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Choi · Answer 1

c. $250,000

Explanation:

Data given in the question

Cost incurred evenly throughout the year = $6,000,000

Took out value = $2,500,000

Interest = 10%

So by considering the above information, the amount of interest capitalize is

= Took out value * Interest

= $2,500,000 * 10%

= $250,000

By multiplying the took out value with the interest we can get the amount of interest that should be capitalized for the year 2018