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Interest During Construction Dexter Construction Corporation is building a student condominium complex; it started construction on January 1, Year 1. Dexter borrowed $2.5 million on
Interest During Construction Dexter Construction Corporation is building a student condominium complex; it started construction on January 1, Year 1. Dexter borrowed $2.5 million on January 1 specifically for the project by issuing a 10%, 5-year, $2.5 million note, which is payable on December 31 of Year 3. Dexter also had a 12%, 5-year, $3 million note payable and a 10%, 10-year $1.8 million note payable outstanding all year. In Year 1, Dexter incurred costs as follows: January 1 $300,000 600,000 1,000,000 480,000 June 30 November 1 Calculate Dexter's capitalized interest on the student condominium complex for Year 1. Capitalized interest - $ 142,750 X You should select an interest rate based on the relationship between the weighted average accumulated expenditures and the amounts borrowed specifically for construction If the weighted average accumulated expenditures are less than or equal to the funds borrowed specifically to finance the construction of a qualifying asset, the company uses the interest rate on that specific borrowing. If the weighted average expenditures on the asset are greater than the specific borrowing or if no specific borrowing is made, the company uses both the Interest rate on the specific borrowing and a weighted average interest rate on all other borrowings
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