Alta Company is constructing a production complex that qualifiesfor interest capitalization. The following information isavailable:
- Capitalization period: January 1, 2019, to June 30, 2020
- Expenditures on project:
| 2019: | | |
| January 1 | $ 516,000 |
| May 1 | 549,000 |
| October 1 | 492,000 |
| 2020: | | |
| March 1 | 1,512,000 |
| June 30 | 600,000 |
- Amounts borrowed and outstanding:
$1.4 million borrowed at 12%, specifically forthe project
$5 million borrowed on July 1, 2018, at 14%
$18 million borrowed on January 1, 2017, at8%
Required:
Note: Round all final numeric answers to twodecimal 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 estimatedlife of 25 years and a residual value of $0, compute thestraight-line depreciation in 2020.
$ fill in the blank 3
- Since GAAP requires accrual accounting, if a companycapitalizes interest during the construction period it will report_________ income than if it had not capitalized interest. In futureperiods, the same company will report ________ income than if ithad not capitalized interest.
