Cooper, Inc $\begin{array}{ll}2010 & \$ 20,000 \\2011 & \$ 60,000\end{array}$ Amounts Borrowed and Outstanding (All Debt Incurred January 1, 2010)

question 84

Essay

Cooper, Inc.is constructing a building that qualifies for interest capitalization.The following information is available:
Capitalization period: January 1, 2010-December 31, 2011 Expenditures on project (incurred evenly):
$\begin{array}{ll}2010 & \$ 20,000 \\2011 & \$ 60,000\end{array}$ Amounts borrowed and outstanding (all debt incurred January 1, 2010):
$\begin{array}{ll}\$ 10,000 & \text { at } 10 \% \text { (specifically for the construction project) } \\\$ 18,000 & \text { at } 12 \% \text { (general debt) } \\\$ 30,000 & \text { at } 14 \% \text { (general debt) }\end{array}$ Required:
a. Compute the amount of interest that should be capitalized in 2010 and 2011 . (Round interest rates to the ne arest hundredths e.g., $07.62 \%$ .)
b. Assume that in 2010 umused borowed funds were invested and eaned interest revemue amounting to $\$ 600$ . How much interest should be capitalized to the asset account in 2011 ?

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