2. On January 1, Model Inc. began construction of a small building. The following expenditures were incurred for construction:

January 1 $2,000,000

April 1 2,800,000

October 1 2,000,000

December 31 3,130,000

The building was completed and occupied on December 31. To help pay for construction $3,250,000 was borrowed on January 1 on a 10%, three-year note payable. The company also has debt outstanding during the year of $10,000,000 bond at 8% issued one year ago.

Instructions

(a) Calculate the weighted-average accumulated expenditures.

(b) Calculate avoidable interest (capitalizable interest)