Brief Exercise 10-14 (Static) Interest capitalization [LO10-7] A company constructs a building for its own use. Construc

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Brief Exercise 10 14 Static Interest Capitalization Lo10 7 A Company Constructs A Building For Its Own Use Construc 1 (60.97 KiB) Viewed 13 times

Brief Exercise 10-14 (Static) 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, $500,000; March 31, $600,000; June 30, $400,000; October 30, $600,000. To help finance construction, the company arranged a 7% construction loan on January 1 for $700,000. The company's other borrowings, outstanding for the whole year, consisted of a $3 million loan and a $5 million note with interest rates of 8% and 6%, respectively. ences 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% ).) Date January 1 March 31 June 30 October 30 Accumulated expenditures Average accumulated expenditures Other loans (not construction) Construction loan Expenditure $ 500,000 x 600,000 x 400.000 x 600,000 x $ 2,100,000 S Amount 1,250,000 700,000 0 Weight 12/12 9/12 6/12 2/12 - Interest Rate 7.00 % 10.00 % M = S 500,000 450,000 200,000 100,000 $1,250,000 Average Capitalized Interest $ $ 49,000 0 49,000