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, $590,000; March 31, $690,000; June 30, $490,000; October 30, $870,000. The company arranged a 8% loan on January 1 for $880,000. Assume the $880,000 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 12% and 7%, 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 Expenditure Weight Average $ 590,000 × 12/12 = $ 590,000 690,000 × 9/12 = 517,500 490,000 x 6/12 = 245,000 870,000 x 2/12 = 145,000 $ 2,640,000 $ 1,497,500 Capitalized Amount Interest Interest Rate Average accumulated expenditures $ 1,497,500 % = $ 0 % = 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, $590,000; March 31, $690,000; June 30, $490,000; October 30, $870,000. The company arranged a 8% loan on January 1 for $880,000. Assume the $880,000 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 12% and 7%, 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 Expenditure Weight Average $ 590,000 × 12/12 = $ 590,000 690,000 × 9/12 = 517,500 490,000 x 6/12 = 245,000 870,000 x 2/12 = 145,000 $ 2,640,000 $ 1,497,500 Capitalized Amount Interest Interest Rate Average accumulated expenditures $ 1,497,500 % = $ 0 % = 0 $ 0
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Question
![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, $590,000; March 31, $690,000; June 30, $490,000; October 30, $870,000. The company
arranged a 8% loan on January 1 for $880,000. Assume the $880,000 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 12% and 7%, 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
Expenditure
Weight
Average
$
590,000 x
12/12 =
$
590,000
March 31
690,000 x
9/12 =
517,500
June 30
490,000 x
6/12 =
245,000
October 30
Accumulated expenditures
870,000 x
2/12 =
145,000
$ 2,640,000
$
1,497,500
Amount
Interest Rate
Capitalized
Interest
Average accumulated expenditures
$ 1,497,500
=
%
=
$
0
%
0
$
0](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F2dc597d1-f391-4a9a-8020-30f2fd394c3e%2Fade0e5d0-2f38-46ea-bdd1-1927857944e5%2Fapz9x2a_processed.png&w=3840&q=75)
Transcribed Image Text: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, $590,000; March 31, $690,000; June 30, $490,000; October 30, $870,000. The company
arranged a 8% loan on January 1 for $880,000. Assume the $880,000 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 12% and 7%, 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
Expenditure
Weight
Average
$
590,000 x
12/12 =
$
590,000
March 31
690,000 x
9/12 =
517,500
June 30
490,000 x
6/12 =
245,000
October 30
Accumulated expenditures
870,000 x
2/12 =
145,000
$ 2,640,000
$
1,497,500
Amount
Interest Rate
Capitalized
Interest
Average accumulated expenditures
$ 1,497,500
=
%
=
$
0
%
0
$
0
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