company constructs a building for its own use. Construction began on January 1 and ended on December 30. The expenditures for onstruction were as follows: January 1, $520,000; March 31, $620,000; June 30, $420,000; October 30, $660,000. To help finance onstruction, the company arranged a 9% construction loan on January 1 for $740,000. The company's other borrowings, outstanding or the whole year, consisted of a $3 million loan and a $5 million note with interest rates of 10% and 6%, respectively. ssuming the company uses the specific interest method, calculate the amount of interest capitalized for the year. (Do not round termediate 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 Expenditure $ $ 520,000 X 620,000 X 420,000 X 660,000 x 2,220,000 Amount $ 1,305,000 Weight 12/12 = 9/12 = 6/12 = 2/12 = Interest Rate % % = = $ 520,000 465,000 210,000 110,000 $1,305,000 Average Capitalized Interest $ $ 0 0 0
company constructs a building for its own use. Construction began on January 1 and ended on December 30. The expenditures for onstruction were as follows: January 1, $520,000; March 31, $620,000; June 30, $420,000; October 30, $660,000. To help finance onstruction, the company arranged a 9% construction loan on January 1 for $740,000. The company's other borrowings, outstanding or the whole year, consisted of a $3 million loan and a $5 million note with interest rates of 10% and 6%, respectively. ssuming the company uses the specific interest method, calculate the amount of interest capitalized for the year. (Do not round termediate 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 Expenditure $ $ 520,000 X 620,000 X 420,000 X 660,000 x 2,220,000 Amount $ 1,305,000 Weight 12/12 = 9/12 = 6/12 = 2/12 = Interest Rate % % = = $ 520,000 465,000 210,000 110,000 $1,305,000 Average Capitalized Interest $ $ 0 0 0
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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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, $520,000; March 31, $620,000; June 30, $420,000; October 30, $660,000. To help finance
construction, the company arranged a 9% construction loan on January 1 for $740,000. The company's other borrowings, outstanding
for the whole year, consisted of a $3 million loan and a $5 million note with interest rates of 10% and 6%, respectively.
Assuming the company uses the specific interest method, calculate the amount of interest capitalized for the year. (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
Expenditure
$
$
$
520,000 x
620,000 x
420,000 x
660,000 x
2,220,000
Amount
1,305,000
Weight
12/12 =
9/12 =
6/12 =
2/12 =
Interest Rate
%
%
=
=
$
Average
520,000
465,000
210,000
110,000
$ 1,305,000
Capitalized
Interest
$
$
0
0
0
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