Cole Co. began constructing a building for its own use, interest incurred was 50k on specific constructions debt and 20K on other borrowings. Interest on the weighted average amount of caccumulated expenditures for the building during the year was 40K. What amount of interest cost should Cole capitalize?
40K-Total interest incurred equals the interest on the specific construction debt (50K) plus interest on other borrowings 20K for a total of 70K. Avoidable interest equals the interest on the weighted-average amount of accumulated expenditures (40K). Capitalized interest equals the smaller of the total interest incurred or the avoidable interest. Thus, capitalized interest equals 40K