Question

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, $680,000; March 31, $780,000; June 30, $580,000; October 30, $1,140,000. To help finance construction, the company arranged a 9% construction loan on January 1 for $1,060,000. The company’s other borrowings, outstanding for the whole year, consisted of a $4 million loan and a $6 million note with interest rates of 10% and 8%, 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 answer to 2 decimal places (i.e. 0.1234 should be entered as 12.34%).)

Answer 1

Ans:

ans 4
Date	Expenditure	Weight	Average
1-Jan	$680,000	12/12	$680,000
31-Mar	780000	9/12	$585,000
30-Jun	580000	6/12	$290,000
30-Oct	1140000	2/12	$190,000
Accumulated expenditures	$3,180,000		$1,745,000
Average	Interest Rate	Capitalized Interest
Average accumulated expenditures	$1,745,000
1060000	7%	$74200
$685,000	8.80%	$60280
Total interest capitalized		$134,480
Average interest rate
	Principal	Interest rate	Interest
Loan 1	4000000	10%	$400000
Loan 2	6000000	8%	$480000
	10000000		$880000
Average int rate=880000/10000000*100		8.80