Reference no: EM132158668
Question - On January 1, 2013, the Seikely- Anderson Company signed a contract with Jones Construction to build a new building for a total contract price of $1,200,000. The building will take one year to build and the following progress payments have been approved by both parties:
Start of contract $200,000
March 31, 2013 250,000
June 30, 2013 250,000
September 30, 2013 250,000
December 31, 2013 250,000
Total payments 1,200,000
On January 1, 2013, Seikely- Anderson borrowed $500,000 at 12% specifically for the project. The note was due in 18 months. The company had no other short-term debt but there were two long-term notes payable outstanding for the entire year: $1,500,000 note with an interest rate of 10% and a $2,500,000 note with an interest rate of 6%.
Required: What is the amount of interest Seikely- Anderson should capitalize in 2013 assuming that the specific interest method is used?
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