The Third Year of a Construction Project Began with a $30,000

question 7

Multiple Choice

The third year of a construction project began with a $30,000 balance in Construction in Progress.Included in that figure is $6,000 of interest capitalized in the first two years.Construction expenditures during the third year were $80,000 which were incurred evenly throughout the entire year.The company has had over $300,000 in interest-bearing debt outstanding the third year,at a weighted average rate of 9 percent.How much interest for the third year is capitalized?

• A) $3,600
• B) $6,300
• C) $9,360
• D) $9,900

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Definitions:

Interest

The cost of borrowing money, typically expressed as a percentage of the principal amount, or the income earned from lending funds.

Straight-Line Method

A depreciation technique that allocates an equal amount of depreciation expense for an asset over its useful life.

General Journal Entry

A record in the general journal that includes all the financial transactions of a company, showing accounts affected, amounts, and whether those amounts are debits or credits.

Amortizing

The process of gradually paying off a debt over time through regular payments.