Answer | ||||
Interest capitalized in 2021 for the building using the specific interest method = $360000 |
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Explanation | ||||
Average accumulated expenditures = $9600,000 / 2 = $4800000 | ||||
Weighted average rate of all other debt | ||||
Amount ($) | x | Rate of interest | = | Weighted average amount ($) |
$ 3,200,000 | x | 8% | = | $ 256,000 |
$ 6,400,000 | x | 5% | = | $ 320,000 |
$ 9,600,000 | $ 576,000 | |||
Weighted average rate = 576,000 / 9600,000 = 6% | ||||
Interest capitalized: | ||||
Amount ($) | x | Rate of interest | = | Interest capitalized ($) |
$ 2,400,000 | x | 9% | = | $ 216,000 |
$ 2,400,000 | x | 6% | = | $ 144,000 |
TOTAL | $ 360,000 | |||
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