Bridgeport Company is constructing a building. Construction began on February 1 and was completed on December 31. Expenditures were $2,052,000 on March 1, $1,200,000 on June 1, and $3,007,200 on December 31. Bridgeport Company borrowed $1,042,720 on March 1 on a 5-year, 13% note to help finance construction of the building. In addition, the company had outstanding all year a 9%, 5-year, $2,039,800 note payable and an 10%, 4-year, $3,462,500 note payable. Compute the weighted-average interest rate used for interest capitalization purposes. (Round answer to 2 decimal places, e.g. 7.58%.)
Weighted-average interest rate %
Weighted average expenditure | |||
Date | amount | period | weighted average expenditure |
01-Mar | 2052000 | 10 month | 1710000 |
01-Jun | 1200000 | 7 month | 700000 |
31-Dec | 3007200 | 0 | 0 |
Weighted average expenditure | 2410000 | ||
2) | amount | interest | |
9% 5 year notes payable | 2039800 | 183582 | |
10% 4 year notes payable | 3462500 | 346250 | |
Total | 5502300 | 529832 | |
weighted average interest rate = 529832/5502300 = 9.63% |
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