Question

Wildhorse Company is constructing a building. Construction began on February 1 and was completed on December 31. Expenditures were $1,824,000 on March 1, $1,224,000 on June 1, and $3,030,540 on December 31.

Wildhorse Company borrowed $1,082,950 on March 1 on a 5-year, 12% note to help finance construction of the building. In addition, the company had outstanding all year a 9%, 5-year, $2,046,800 note payable and an 10%, 4-year, $3,555,500 note payable. Compute the weighted-average interest rate used for interest capitalization purposes. (Round answer to 2 decimal places, e.g. 7.58%.)

Answer 1

Solution:

Weighted average interest rate of all other debt
Debt	Amount	Interest rate	Interest amount
9% Note	$20,46,800	9%	$1,84,212
10% Note	$35,55,500	10%	$3,55,550
Totals	$56,02,300		$5,39,762
Weighted average rate (total interests/ total debt)		9.63%