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:

Semi-annually

Refers to an event occurring twice a year, or every six months.

Coupon Rate

The annual interest rate paid on a bond, expressed as a percentage of the face value, to the bondholder.

Par Value

Par value is the nominal or face value of a bond, share of stock, or coupon as indicated on a bond or stock certificate; it is a static value and not indicative of market value.

Treasury Bill

Short-term U.S. government debt obligations backed by the Treasury Department with a maturity of less than one year.