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During 20X1, X Company manufactured equipment for its own use at a total cost of $2,400,000. The project required the entire year to complete, all costs were incurred uniformly throughout the year

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Question

1.     During 20X1, X Company manufactured equipment for its own use at a total cost of $2,400,000. The

project required the entire year to complete, all costs were incurred uniformly throughout the year. At the beginning of the period, X was able to borrow $1,500,000 at 6% specifically for the purchase of materials and the manufacture of the equipment. The entire debt, with interest was repaid on December 31, 20X1, replaced with a long-term loan. Throughout 20X1, X Company had additional debt of $1,000,000 with a weighted average interest rate of 7%.

If X Company capitalizes to the equipment the maximum amount of interest allowable under GAAP, how much will X report as interest expense in 20X1?

 
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