- Brief Exercise 10 15 Static Interest Capitalization Lo10 7 A Company Constructs A Building For Its Own Use Construc 1 (120.87 KiB) Viewed 19 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, 2021 March 31, 2021 June 30, 2021 October 30, 2021 Accumulated expenditure Average accumulated expenditures Expenditure $ $ 500,000 X 600,000 X 400,000 X 600,000 x 2,100,000 Amount $ 1,250,000 Weight 12/12 = 9/12 = 6/12 = 2/12 = Interest Rate % % = = $ $ $ Average Capitalized Interest $ 500,000 450,000 200,000 100,000 1,250,000 0 0 0