The Following Three Situations Involve The Capitalization Of Interest Situation

The following three situations involve the capitalization of interest.



On January 1, 2017, Blossom, Inc. signed a fixed-price contract to have Builder Associates construct a major plant facility at a cost of $4,266,000. It was estimated that it would take 3 years to complete the project. Also on January 1, 2017, to finance the construction cost, Blossom borrowed $4,266,000 payable in 10 annual installments of $426,600, plus interest at the rate of 10%. During 2017, Blossom made deposit and progress payments totaling $1,599,750 under the contract; the weighted-average amount of accumulated expenditures was $853,200 for the year. The excess borrowed funds were invested in short-term securities, from which Blossom realized investment income of $258,200.

What amount should Blossom report as capitalized interest at December 31, 2017?

Capitalized interest $____________

Prof. Angela


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