Culiver, Inc $\quad$ $20,000
2017 $\quad$ $60,000
Amounts Borrowed and Outstanding All Debt Incurred January 1

question 48

Essay

Culiver, Inc. is constructing a building that qualifies for interest capitalization. The following information is available: Capitalization period: January 1, 2016-December 31, 2017 Expenditures on project incurred evenly):
2016 $\quad$ $20,000
2017 $\quad$ $60,000
Amounts borrowed and outstanding all debt incurred January 1, 2016):
$10,000 at $\quad$ 10% specifically for the construction project)
$18,000 at $\quad$ 12% general debt)
$30,000 at $\quad$ 14% general debt)
Required:
a. Compute the amount of interest that should be capitalized in 2016 and 2017. Round interest rates to the nearest hundredths,
b. Assume that in 2016 unused borrowed funds were invested and earned interest revenue amounting to $600. How much interest should be capitalized to the asset account in 2017?
e.g., 07.62%.)

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Definitions:

Conversion Costs

Costs incurred to convert raw materials into finished products, including both direct labor and manufacturing overhead expenses.

Conversion Cost

The combined total of direct labor and manufacturing overhead costs, representing the expenses necessary to convert raw materials into finished goods.

Direct Materials

Direct materials constitute the primary raw inputs directly incorporated into the manufacture of products, distinctly traceable to the product being produced.

Completed During Period

Refers to activities, projects, or production that have been started and finished within a specific timeframe, often relating to manufacturing or project management.