The Allen Company Has Decided to Construct Its Own Warehouse

Essay

The Allen Company has decided to construct its own warehouse facility.The construction will be partially financed through a construction loan and the remainder will be financed from internally generated funds.The company's accountants have collected the following information concerning the construction.
$\begin{array}{llll}& \text { Average Balance } & \text { Construction } & \text { Other } \\\text { Year } & \text { ConstructionAccount } & \text { Debt } @ 14 \% & \text { Debt } @ 10 \%\\1 & \$ 1,000,000 & \$ 1,000,000 & \$ 1,500,000 \\2 & \$ 2,000,000 & \$ 1,700,000 & \$ 1,700,000 \\3 & \$ 2,500,000 & \$ 2,000,000 & \$ 1,300,000\end{array}$ Required:
Determine the amount, if any, of capitalized interest cost for each year.

a. Year 1
b. Year 2
c. Year 3