- Brief Exercise 10 15 Static Interest Capitalization Lo10 7 A Company Constructs A Building For Its Own Use Construc 1 (56.53 KiB) Viewed 10 times
Brief Exercise 10-15 (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. The
company arranged a 7% loan on January 1 for $700,000. Assume the $700,000 loan is not specifically tied to the construction of the building. 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. Assuming the
company uses the weighted-average 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, 20211 March 31, 2021 June 30, 2021 October 30, 2021 Accumulated expenditure Average accumulated expenditures Answer is not complete. Weight Expenditure S 500.000 600.000 x 400,000 x 600,000 x $ 2,100,000 Amount $ 1,250,000 550,000 700,000 x 12/12 9/12 = 6/12 2/12 Interest Rate 8 00 % 6.00 % H 500,000 450,000 200,000 100,000 $1,250,000 Average Capitalized Interest $ $ 44,000 42.000 86,000