D is corrent. To determine the capitalized amount of interest, apply an interest rate to the average amount of accumulated expenditures for the asset during the period, which would be $3,000,000 [($0 + $6,000,000) /2]. Therefore, the amount of interest to be capitalized is $450,000 ($3,000,000 x 15%). In any period the total capitalized interest shall not exceed the total amount of interest cost incurred by the enterprise not given in this question. Per ASC Topic 835, the interest earned of $400,000 is irrelevant to the question because interest earned on the unexpended portion of the loan is not to be offset against the amount eligible for capitalization.
A is incorrect. To determine the capitalized amount of interest, apply an interest rate to the average amount of accumulated expenditures for the asset during the period, which would be $3,000,000 [($0 + $6,000,000) /2]. Therefore, the amount of interest to be capitalized is $450,000 ($3,000,000 x 15%). In any period the total capitalized interest shall not exceed the total amount of interest cost incurred by the enterprise not given in this question. Per ASC Topic 835, the interest earned of $400,000 is irrelevant to the question because interest earned on the unexpended portion of the loan is not to be offset against the amount eligible for capitalization.
A is incorrect. To determine the capitalized amount of interest, apply an interest rate to the average amount of accumulated expenditures for the asset during the period, which would be $3,000,000 [($0 + $6,000,000) /2]. Therefore, the amount of interest to be capitalized is $450,000 ($3,000,000 x 15%). In any period the total capitalized interest shall not exceed the total amount of interest cost incurred by the enterprise not given in this question. Per ASC Topic 835, the interest earned of $400,000 is irrelevant to the question because interest earned on the unexpended portion of the loan is not to be offset against the amount eligible for capitalization.
A is incorrect. To determine the capitalized amount of interest, apply an interest rate to the average amount of accumulated expenditures for the asset during the period, which would be $3,000,000 [($0 + $6,000,000) /2]. Therefore, the amount of interest to be capitalized is $450,000 ($3,000,000 x 15%). In any period the total capitalized interest shall not exceed the total amount of interest cost incurred by the enterprise not given in this question. Per ASC Topic 835, the interest earned of $400,000 is irrelevant to the question because interest earned on the unexpended portion of the loan is not to be offset against the amount eligible for capitalization.
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