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Question 1: Hilary Corp. contracted with a company to build a storage warehouse...

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Accounting

Question 1:
Hilary Corp. contracted with a company to build a storage warehouse in Year 1. Construction
began on April 1 at which time Hilary Corp. paid $65,000. Hilary Corp. then made additional
payments as follows, based on progress made towards completion of the structure:
Hilary Corp. borrowed $95,000 on January 1 specifically for this project at 8% interest. Hilary had
the following non-specific borrowings (i.e., general borrowings) outstanding during the year:
15%,$2.5 million loan
7.5%,$500,000 loan
a. How much interest should be capitalized on this building?
b. What is the amount of interest expense that will appear on Hilary's Year 1 income
statement?
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