in 2022 Company constructed a building at a total cost of $23,700,000. The

weighted average accumulated expenditures on assets qualifying for capitalization of interest during 2022

were $14,750,000. The company had the following debt outstanding at December 31, 2022:

1. 8.4%, 5-year note to finance construction of building,

dated January 1, 2022, with interest payable annually on January 1 $7,700,000

2. 9%, ten-year bonds issued at par on December 31, 2015, with interest

payable annually on December 31 11,400,000

3. 5.7%, 3-year note payable, dated January 1, 2020, with interest payable

annually on January 1 6,800,000

Instructions

Compute the amounts of each of the following (show ALL computations).

1. Avoidable interest including a separate calculation for weighted average interest rate for the

existing debt prior to this construction project.

2. Actual interest calculation

3. Total interest to be capitalized during 2022.

4. Present the journal entry for the capitalized interest.

5. Provide a theoretical reason for interest capitalization.