Place Company Started Construction of a New Office Building on January

question 65

Multiple Choice

Place Company started construction of a new office building on January 1,2014,and moved into the finished building on July 1,2015.Of the building's $5,000,000 total cost,$4,000,000 was incurred in 2014 evenly throughout the year.Place's incremental borrowing rate was 12 percent throughout 2014,and the total amount of interest incurred by Place during 2014 was $204,000.What amount should Place report as capitalized interest at December 31,2014?

• A) $480,000
• B) $300,000
• C) $240,000
• D) $204,000

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Definitions:

Average Variable Cost

The total variable costs (costs that change with the level of output) of production divided by the quantity of output produced.

Industry Expands

The growth phase of an industry characterized by an increase in output, number of producers, or production capacity.

Accompanying Graph

A visual representation used alongside data or concepts to illustrate trends, patterns, or relationships in a clear and effective manner.

Decreasing-Cost Industry

An industry in which costs per unit decline as the industry scales up production, often due to economies of scale.