Thornton Industries began construction of a warehouse on July 1, 2018. The project was completed on March 31, 2019. No new loans were required to fund construction. Thornton does have the following two interest-bearing liabilities that were outstanding throughout the construction period: $2,000,000, 8% note $8,000,000, 4% bonds Construction expenditures incurred were as follows: July 1, 2018 $ 400,000 September 30, 2018 600,000 November 30, 2018 600,000 January 30, 2019 540,000 The company’s fiscal year-end is December 31. Required: Calculate the amount of interest capitalized for 2018 and 2019.

2018 $21,600

2019 $4,320

Explanation:

We need to work out average cost of borrowing as follows;

$2,000,000*8%+$8,000,000*4%=$480,000

$480,000/(2,000,000+8,000,000)=4.8%

July1, 2018    $400,000*4.8%*6/12=$9,600

Sept 30,2018  $600,000*4.8%*3/12=$7,200

Nov. 30, 2018  $600,000*4.8%* 2/12=$4,800

Total interest to be capitalized in December 31, 2018 =$21,600

Total interest to be capitalized in December 31 2018$540,000*4.8%*2/12=$4,320

forbearance of student loan payments. under forbearance, your loan payments are postponed (or reduced) but interest continues to accrue during the period of forbearance. if you don't pay the interest during that period, the interest may be “capitalized,” which means it is added to your principal balance.