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
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, $550,000; March 31, $650,000; June 30, $450,000; October 30, $750,000. The company arranged a 8% loan on January 1 for $800,000. Assume the $800,000 loan is not specifically tied to the construction of the building. The company's other borrowings, outstanding for the whole year, consisted of a $4 million loan and a $6 million note with interest rates of 13% and 10%, respectively. Assuming the company uses the weighted-average method, calculate the amount of interest capitalized for the year. Note: Enter your answers in whole dollars and not in millions. Do not round intermediate calculations. Round your percentage answers to 2 decimal places (i.e. 0.1234 should be entered as 12.34%). Date Expenditure Weight Average January 1 $ 550,000 x 12/12 = $ 550,000 March 31 650,000 x 9/12- 487,500 June 30 450,000 x 6/12 = 225,000 October 30 750,000 x 2/12 = 125,000 Accumulated expenditures $ 2,400,000 Amount Interest Rate $ 1,387,500 Capitalized Interest Average accumulated expenditures $ 1,387,500 All loans 11,984,000 = 10.96 % = $ 1,313,446 % = 0 $ 1,313,446
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