Alta Company is constructing a production complex that qualifies for interest capitalization. The following information is available:Capitalization period: January 1, 2019, to June 30, 2020Expenditures on project:2019: January 1$ 504,000 May 1405,000 October 1504,0002020: March 11,392,000 June 30540,000Amounts borrowed and outstanding: $1.6 million borrowed at 10%, specifically for the project $6 million borrowed on July 1, 2018, at 12% $13 million borrowed on January 1, 2017, at 6%Instructions:Note: Round all final numeric answers to two decimal places.Compute the amount of interest costs capitalized each year.Capitalized interest, 2019$ fill in the blank 1Capitalized interest, 2020$ fill in the blank 2If it is assumed that the production complex has an estimated life of 20 years and a residual value of $0, compute the straight-line depreciation in 2020.$ fill in the blank 3

Borrowing costs relating to the acquisition, construction, and production of a qualifying asset…

Answered: Alta Company is constructing a…

Intermediate Accounting: Reporting And Analysis

3rd Edition

ISBN:9781337788281

Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Chapter10: Property, Plant And Equipment: Acquisition And Subsequent Investments

Section: Chapter Questions

Problem 9P

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Question

Alta Company is constructing a production complex that qualifies for interest capitalization. The following information is available:

Capitalization period: January 1, 2019, to June 30, 2020
Expenditures on project:

2019:

January 1 $ 504,000

May 1 405,000

October 1 504,000

2020:

March 1 1,392,000

June 30 540,000
Amounts borrowed and outstanding:
   $1.6 million borrowed at 10%, specifically for the project
   $6 million borrowed on July 1, 2018, at 12%
   $13 million borrowed on January 1, 2017, at 6%

Instructions:

Note: Round all final numeric answers to two decimal places.

Compute the amount of interest costs capitalized each year.

Capitalized interest, 2019 $ fill in the blank 1

Capitalized interest, 2020 $ fill in the blank 2
If it is assumed that the production complex has an estimated life of 20 years and a residual value of $0, compute the straight-line depreciation in 2020.

$ fill in the blank 3

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