7 On January 1, 2018, the Highlands Company began construction on a new manufact

Question

7 On January 1, 2018, the Highlands Company began construction on a new manufacturing facility for its own use. The building was completed in 2019. The company borrowed $1,650,000 at 10% on January 1 to help finance the construction. In addition to the construction loan, Highlands had the following debt outstanding throughout 2018 0.85 points $6,000,000, $4,000,000, 15% 10% bonds long-term note eBook Construction expenditures incurred during 2018 were as follows: January 1 March 31 June 30 September 30 December 31 $ 720,000 1,320,000 944,000 720,000 520,000 Ask Print Required: Calculate the amount of interest capitalized for 2018 using the specific interest method. (Do not round the intermediate calculations. Round your percentage answers to 1 decimal place (i.e. 0.123 should be entered as 12.3%).) References Date Expenditure Weight Average January 1 March 31 June 30 September 30 December 31 Accumulated expenditure Capitalized Interest Average Interest Rate Average accumulated expenditures Mc

Explanation / Answer

Expenditure Weight Average January 1 720000 12/12 720000 March 1 1320000 9/12 990000 June 30 944000 6/12 472000 September 30 720000 3/12 180000 December 31 520000 0/12 0 Accumulated expenditure 4224000 2362000 Average Interest Rate Capitalized Interest Average accumulated expenditures 2362000 Construction loan 1650000 10% 165000 Other loans (not construction) 712000 13% 92560 257560

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