Answered step by step
Verified Expert Solution
Question
1 Approved Answer
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
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, $560,000; March 31, $660,000; June 30, $460,000; October 30, $780,000. To help finance construction, the company arranged a 9% construction loan on January 1 for $820,000. The company's other borrowings, outstanding for the whole year, consisted of a $2 million loan and a $4 million note with interest rates of 11% and 8%, respectively. Assuming the company uses the specific interest method, calculate the amount of interest capitalized for the year. (Do not round intermediate calculations. Round your percentage answers to 2 decimal places (i.e. 0.1234 should be entered as 12.34%).) Average Expenditure S 560,000 x Date January 1 March 31 June 30 October 30 Accumulated expenditures Weight 12/12 9/12 6/12 = 2/12 = $ 560,000 Interest Rate Capitalized Interest $ Average accumulated expenditures Construction loan Other loans (not construction) Average 0 820,000 595,000 $ 9.00% 9.00% = = 73,800 53,550 127,350 $
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started