Solution 1: | |||
Weighted-Average accumulated expenditure | |||
Date | Amount | Capitalization period | Weighted Average Accumulated Expenditures |
01 June 2017 | $61,56,000 | 7/12 | $35,91,000 |
31 August 2017 | $91,68,000 | 4/12 | $30,56,000 |
31 December 2017 | $74,04,000 | 0/7 | $0 |
Total | $2,27,28,000 | $66,47,000 |
Solution 2:
Computation of Avoidable Interest | |||
Debt | Weighted Average Accumulated Expenditures | Interest rate | Avoidable Interest amount |
From 9% Bond | $51,90,000 | 9% | $4,67,100 |
From 12% Note | $12,60,000 | 12% | $1,51,200 |
Totals | $64,50,000 | $6,18,300 |
Solution 3:
Computation of Actual Interest cost incurred | |||
Debt | Weighted Average Accumulated Expenditures | Interest rate | Actual Interest |
From 9% Bond (for 7 months) | $51,90,000 | 9% | $2,72,475 |
From 12% Note | $12,60,000 | 12% | $1,51,200 |
Totals | $64,50,000 | $4,23,675 | |
Total amount of Interest cost to be capitalized for 2017 (Lower of actual interest or Avoidable interest) | $4,23,675 |
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