On January 1, 2011, Sky Airlines Contracted with Dover Aircraft

question 44

Essay

On January 1, 2011, Sky Airlines contracted with Dover Aircraft to construct an aircraft to Sky's specifications at a cost of $2,000,000. During 2011, Sky paid Dover $400,000 on January 1, and another $250,000 on September 30. On January 1, Sky borrowed $360,000 at 13% to partially finance the construction, an obligation still outstanding at the end of 2011. The remaining amount paid to Dover was financed from available working capital. Sky has approximately $1,600,000 of additional debt outstanding at an average interest cost of 12%.
Required:
What is the total capitalized cost of the aircraft under construction at the end of 2011?

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