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, $640,000; March 31, $740,000; June 30, $540,000; October 30, $1,020,000. The company arranged a 9% loan on January 1 for $980,000. Assume the $980,000 loan is not specifically tied to the construction of the building. The company's other borrowings, outstanding for the whole year, consisted of a $4 million loan and a $6 million note with interest rates of 11% and 8%, respectively. Assuming the company uses the weighted-average method, calculate the amount of interest capitalized for the year. Note: Enter your answers in whole dollars and not in millions. Do not round intermediate calculations. Round your percentage answers to 2 decimal places (i.e. 0.1234 should be entered as 12.34%). Date January 1 March 31 June 30 October 30 Accumulated expenditures Average accumulated expenditures All loans Other loans (not construction) Expenditure $ $ $ 640,000 x 740,000 x 540,000 x 1,020,000 x 2,940,000 Amount 1,635,000 Weight 12/12 = 9/12 = 6/12 = 2/12 = Interest Rate II = $ $ Average % = $ % Capitalized Interest $ EA 640,000 555,000 270,000 170,000 1,635,000 0 0

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, $640,000; March 31, $740,000; June 30, $540,000; October 30, $1,020,000. The company arranged a 9% loan on January 1 for $980,000. Assume the $980,000 loan is not specifically tied to the construction of the building. The company's other borrowings, outstanding for the whole year, consisted of a $4 million loan and a $6 million note with interest rates of 11% and 8%, respectively. Assuming the company uses the weighted-average method, calculate the amount of interest capitalized for the year. Note: Enter your answers in whole dollars and not in millions. Do not round intermediate calculations. Round your percentage answers to 2 decimal places (i.e. 0.1234 should be entered as 12.34%). Date January 1 March 31 June 30 October 30 Accumulated expenditures Average accumulated expenditures All loans Other loans (not construction) Expenditure $ $ $ 640,000 x 740,000 x 540,000 x 1,020,000 x 2,940,000 Amount 1,635,000 Weight 12/12 = 9/12 = 6/12 = 2/12 = Interest Rate II = $ $ Average % = $ % Capitalized Interest $ EA 640,000 555,000 270,000 170,000 1,635,000 0 0

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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