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Lakeshore Gelato Company is constructing a production complex that qualifies for interest capitalization. The following...

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Accounting

Lakeshore Gelato Company is constructing a production complex that qualifies for interest capitalization. The following information is available:

  • Capitalization period: January 1, 20Y1, to June 30, 20Y2

  • Expenditures on project:
20Y1:
January 1 $ 648,000
May 1 537,000
October 1 620,000
20Y2:
March 1 1,940,000
June 30 445,000
  • Amounts borrowed and outstanding: $1.5 million borrowed at 9%, specifically for the project $6 million borrowed on July 1, 2019, at 7% $13 million borrowed on January 1, 2018, at 8%

Required:

(Round all final numeric answers to two decimal places.)

  1. Compute the amount of interest costs capitalized each year.

  1. If it is assumed that the production complex has an estimated life of 20 years and a residual value of $0, compute the straight-line depreciation in 20Y2.

  1. What would be disclosed on the 20Y1 and 20Y2 financials
    1. Income Statement
    2. Balance Sheet

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