Situation II During 2017 Blue Corporation constructed and ma

Situation II During 2017, Blue Corporation constructed and manufactured certain assets and incurred the following interest costs in connection with those activities. Interest Costs Incurred $33,320 Warehouse constructed for Blue\'s own use Special-order machine for sale to unrelated customer, produced according to customer\'s specifications Inventories routinely manufactured, produced on a repetitive basis 9,080 7,370 All of these assets required an extended period of time for completion. Assuming the effect of interest capitalization is material, what is the total amount of interest costs to be capitalized? The total amount of interest costs to be capitalized

Solution

The total amount of interest costs to be capiralized $42,400 ($33,320 + $9,080)

AS GAAP guideline assets which qualify for interest capitalization are assets contructed for enterprises\'s own use and assets intended for sale or lease that are produced as discrete projects, inventories that are routinely produced inlarge quantities on a repetitive basis do not qualify for interest capitalization.