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# Brick Company started construction on a new office building on January 1, 2011, and moved into the finished building on July 1, 2012.

Brick Company started construction on a new office building on January 1, 2011, and moved into the finished building on July 1, 2012. Of the building’s \$3,000,000 total cost, \$2,000,000 was incurred in 2011 evenly throughout the year. The remaining \$1,000,000 was paid in installments of \$500,000 each on February 1, 2012 and June 30, 2012. Brick’s incremental borrowing rate was 12% throughout the construction period and the total amount of interest incurred by Brick during 2011 and 2012 was \$200,000 and \$210,000 respectively. What amount of capitalized interest should Brick report as part of its building account at December 31, 2011?

Solution:Commencement of construction = january 1, 2011
Date of completion = July 1, 2012
Total cost of completing building = \$3,000,000
Cost incurred in 2011 = \$2,000,000 (evenly throughout the...

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