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Brief Exercise 10-14 Interest capitalization (LO10-7] A company constructs a building for its own use. Construction began on January 1 and ended on December 30.
Brief Exercise 10-14 Interest capitalization (LO10-7] 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, $570,000; March 31, $670,000; June 30, $470,000; October 30, $810,000. To help finance construction, the company arranged a 10% construction loan on January 1 for $840,000. 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 14% and 10%, respectively. 10.38/125 points awarded 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 (ie. 0.1234 should be entered as 12.34%).) Date - January 1 March 31 June 30 October 30 Accumulated expenditures Expenditure 570,000 670,000 470.000 810,000 S 2.520,000 Weight 12/12 9/12 6/12 2/12 Average $570,000 502,500 235,000 135,000 $ 1/442500 - - Capital red Average Interest Rate S 1442,500 Average accumulated expenditures Other loans (not construction) Construction loan % 4.000.000 6.000.000 14.00 10.00 500 000 000000 $ 1,100 000
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