Capitalization of Interest ‘Carver Department Stores, Inc., constructs its own stores. In the past, no cost has been added to the asset value for interest on funds borrowed for construction, Management has decided to correct its policy and desires to include interest as part of the cost of a new store just being completed, Based on the following information, how much interest would be added to the cost of the store (1) in 2011 and (2) in 2012? Total construction expenditures: January 2,201 . ce May 1. 2011 - - - ce - - - . November I, 201 - - - - - - March 12012... - - ce . - - September I, 2012. . - a ce November 30, 2012 - - ce . oe - Outstanding company debt: Mortgage related directly to new store; interest rate, 10%; term, 5 years from beginning of construction - - $1,500,000 General bond liability: Bonds issued just prior to construction of store; interest rate, 8% for 10 years - - $ 500,000 Bonds issued prior to construction; interest rate, 12% mature in S years. -... $ 800,000 Estimated cost of equity capital ee 14%