Brief Exercise 10-3 Crane Company is constructing a building. Construction began

Question

Brief Exercise 10-3 Crane Company is constructing a building. Construction began on February 1 and was completed on December 31. Expenditures were $1,896,000 on Mar and $3,094,220 on December 31. ch 1, $1,296,000 on June 1 Crane Company borrowed $1,028,960 on March 1 on a 5-year, 12% note to help finance construction of the building. In addition, the company had ou $2,013,900 note payable and an 11%, 4-year, $3,826,400 note payable. Compute the weighted-average interest rate used for interest capi decimal places, eg. 7.58%.) tstanding all year a 10%, 5-yea tal atom ur Ro nd er 02 Weighted-average interest rate Click if you would like to Show Work for this question: Onen Show Work LINK TO TEXT By accessing this Question Assistance, ywilllearn while you earn points based on the Point Potential Policy set by your instructor. Question Attempts: 0 of 3 used SAVE FOR LATER SUBMIT ANSWER Earn Maximum Points available only if you answer this question correctly in your first attempt

Explanation / Answer

SOLUTION

Principal = $2,013,900 + $3,826,400 = $5,840,300

Interest = ($2,013,900 * 10%) + ($3,826,400 * 11%)

= $201,390 + $420,904

= $622,294

Weighted average rate = $622,294 / $5,840,300 = 10.66%

Date Amount ($) (A) Capitalization period (B) Weighted-Average Accumulated Expenditures ($) (A*B) March 1 1,896,000 10/12 1,580,000 June 1 1,296,000 7/12 756,000 Dec. 31 3,094,220 0 0 6,286,220 2,336,000

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