Oriole Company is constructing a building. Construction began on February 1 and

Question

Oriole Company is constructing a building. Construction began on February 1 and was completed on December 31. Expenditures were $1,968,000 on March 1, $1,248,000 on June 1, and $3,076,020 on December 31. Oriole Company borrowed $1,145,430 on March 1 on a 5-year, 13% note to help finance construction of the building. In addition, the company had outstanding all year a 9%, 5-year, $2,433,900 note payable and an 10%, 4-year, $3,482,600 note payable. Compute the weighted-average interest rate used for interest capitalization purposes.

Explanation / Answer

Note payable(2433900*9%)            219,051 Note payable(3,482,600 *10%)            348,260            567,311 Total Interest / Total Loan amount *100 567311 / 5916500 *100 9.59%

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