Question

A company constructs a building for its own use Construction began on January 1 and ended on December 30. The expenditures for construction were as follows January 1. $700,000, March 31 $800,000. June 30, $600,000 October 30 $1,200,000To help finance construction, the company arranged a 8% construction loan on January 1 for $1.100,000. The company's other borrowings. outstanding for the whole year consisted of a $7 million loan and a $9 million note with interest rates of 10% and 6%, respectively Assuming the company uses the weighted average method, calculate the amount of interest capitalized for the year (Do not round intermediate calculations. Round your percentage answer to 2 decimal places fi.e. 0.1234 should be entered as 12.34%).) Date Weight Expenditure 5 700 000 12/12 800.000 January 1, 2018 March 31, 2018 June 30, 2018 October 30, 2018 Accumulated expenditures Average S 700.000 600 000 300.000 200.000 $ 1,800,000 600 000 1 200,000 $ 3,300,000 Average Interest Rate Capitalized Interest Average accumulated expenditures $ 1.800.000

Answer 1

Average date Jan 1. Mar 31. Jun 30. Oct 30. calculation of average accumulated expenditure expenditure weight 700000 x 12/12 800000 x 9/12 600000 x 6/12 1200000 x 2/12 3300000 700000 600000 300000 200000 1800000 Average Average accumulated expenditure | 1800000 Interest rate** 7.77% capitalized interest 139789 **working: Weighted average rate of all debt: borrowing 1100000 7000000 9000000 17100000 Interest rate Interest amount 8% 88000 10% 700000 6% 540000 1328000 7.77% Weighted average rate of all debt: (1328000/17100000)