Brief Exercise 10-3 Bramble Company is constructing a building. Construction beg

Question

Brief Exercise 10-3

Bramble Company is constructing a building. Construction began on February 1 and was completed on December 31. Expenditures were $1,872,000 on March 1, $1,272,000 on June 1, and $3,056,400 on December 31.

Bramble Company borrowed $1,174,000 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 10%, 5-year, $2,151,700 note payable and an 11%, 4-year, $3,326,100 note payable. Compute the weighted-average interest rate used for interest capitalization purposes. (Round answer to 2 decimal places, e.g. 7.58%.)

Weighted-average interest rate

%

Explanation / Answer

weighted avg rate of interest = total amount of interest / total amount of loan

= 581041 / 5477800

= 10.61 %

type of loan ( other than specific borrowing for construction) amount interest rate interest 5 year note payable 2151700 10% 215170 4 year note payable 3326100 11% 365871 total 5477800 581041

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