Brief Exercise 10-14 - Please show step in detail Thank you, A company construct
ID: 2484023 • Letter: B
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Brief Exercise 10-14 - Please show step in detail
Thank you,
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. $540,000: March 31. $640,000: June 30. $440,000: October 30. $720,000 To help finance construction, the company arranged a 7% construction loan on January 1 for $780,000. The company's other borrowings, outstanding for the whole year, consisted of a $5 million loan and a $7 million note with interest rates of 9% and 6%, respectively. 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%).)Explanation / Answer
Date Expenditure Weight Average January 1 540000 12/12 540000 March 31 640000 9/12 480000 June 30 440000 6/12 220000 October 31 720000 2/12 120000 Accumulated Exp 2340000 1360000 Interest Rate Capitalized Interest Average Accumulated Exp 1360000 Construction Loan 780000 7% 54600 Other Loan 580000 7.25% 42050 1360000 96650 * Other Loan weighted average finance cost $ Rate of Interest interest other loan 5000000 9% 450000 Notes 7000000 6% 420000 12000000 7.25% 870000
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