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Question
Brick Company started construction on a new office building on January 1, 2011, and moved into the finished building on July 1, 2012. Of the building's $3,000,000 total cost, $2,000,000 was incurred in 2011 evenly throughout the year. The remaining $1,000,000 was paid in installments of $500,000 each on February 1, 2012 and June 30, 2012. Brick's incremental borrowing rate was 12% throughout the construction period and the total amount of interest incurred by Brick during 2011 and 2012 was $200,000 and $210,000 respectively.
Required:
a. What amount of capitalized interest should Brick report as part of its building account at December 31, 2011?
b. What amount of capitalized interest should Brick report as part of its building account at December 31, 2012?
Answer
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