Alzparker Company constructed a building at a total actual c

Alzparker Company constructed a building at a total actual cost of $ 25 comma 000 comma 000. Average accumulated expenditures during the construction period amounted to $ 18 comma 000 comma 000. As a result of financing? arrangements, actual interest was $ 2 comma 120 comma 000?, and avoidable interest was $ 1 comma 500 comma 000. What is the capitalizable cost of the? equipment? A. $ 20 comma 120 comma 000

Solution

Cost of Equipment to be Capitalized = $26,500,000 Workings: Cost of Equipment to be Capitalized = $25,000,000 + $1,500,000 = $26,500,000 Interest to be Capitalized (Lower of) Actual Interest cost incurred during the period = $2,120,000 Amount of Avoidable Interest cost = $1,500,000 Lower of above = $1,500,000