Question

On January 1, 2021, the Highlands Company began construction on a new manufacturing facility for its own use. The building was completed in 2022. The company borrowed $2,350,000 at 9% on January 1 to help finance the construction. In addition to the construction loan, Highlands had the following debt outstanding throughout 2021:

$7,000,000, 14% bonds

$3,000,000, 9% long-term note

Construction expenditures incurred during 2021 were as follows:

January 1	$	960,000
March 31		1,560,000
June 30		1,232,000
September 30		960,000
December 31		760,000

Required:
Calculate the amount of interest capitalized for 2021 using the specific interest method. (Do not round the intermediate calculations. Round your percentage answers to 1 decimal place (i.e. 0.123 should be entered as 12.3%).)

	Date Expenditure Weight Average January 1 x = March 31 x = June 30 x = September 30 x = December 31 x = Accumulated expenditure $0 $0 Average Interest Rate Capitalized Interest Average accumulated expenditures $0 x % = $0 x % = 0 $0

Answer 1



Stepa An Date Expendituse weight Average $ 96000 January 1 9 60,00 march 31 1$ 60,000 :60.00 x $ 1170,000 June 30 1,232,00 $ 61600 of its mis of Sept 30 9, 60000 $ 240,00 Dec 31 7,60,000 x $ 2986000 Step2 Calculation of Average interest rate for general debt. Amount Rate Interest 14% $ 980,00 Bonds $ 7000000 Long team roote & Bow ou au $ 270,00 $125900 $10,000,oo Average mtesestrate 1250000 10,000,00 = 12.5 % Step-3 Calculation of interest Capitalized Average Interest rate Capitalized Intesest Specific Debt 2,350,00 x 94 = $ 211500 General Debt 124,86,00 -23.5000] 63600 x 12.5% = $79500 $291000