A company constructs a building for its own use. Construction began on January 1 and ended on December 30. The expenditures fo construction were as follows: January 1, $580,000; March 31, $680,000; June 30, $480,000; October 30, $840,000. The company arranged a 7% loan on January 1 for $860,000. Assume the $860,000 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 8% and 6%, 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 Answer is complete but not entirely correct. Expenditure Weight $ 580,000 680,000 480,000 840,000 $ 2,580,000 Amount $ 1,470,000 100,254 X Average 12/12 = $ 580,000 9/12 510,000 240,000 6/12 2/12 Interest Rate 6.82 = || = 11 = % % = = 140,000 $ 1,470,000 Capitalized Interest $ S 6,837 0 6837
A company constructs a building for its own use. Construction began on January 1 and ended on December 30. The expenditures fo construction were as follows: January 1, $580,000; March 31, $680,000; June 30, $480,000; October 30, $840,000. The company arranged a 7% loan on January 1 for $860,000. Assume the $860,000 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 8% and 6%, 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 Answer is complete but not entirely correct. Expenditure Weight $ 580,000 680,000 480,000 840,000 $ 2,580,000 Amount $ 1,470,000 100,254 X Average 12/12 = $ 580,000 9/12 510,000 240,000 6/12 2/12 Interest Rate 6.82 = || = 11 = % % = = 140,000 $ 1,470,000 Capitalized Interest $ S 6,837 0 6837
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, $580,000; March 31, $680,000; June 30, $480,000; October 30, $840,000. The company
arranged a 7% loan on January 1 for $860,000. Assume the $860,000 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 8% and 6%, 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
Answer is complete but not entirely correct.
Expenditure
Weight
S 580,000
680,000
480,000
840,000
$ 2,580,000
Amount
$ 1,470,000
100,254 X
12/12
9/12
6/12
2/12
Interest Rate
6.82 %
=
=
=
=
=
% =
Average
$ 580,000
510,000
240,000
140,000
$ 1,470,000
Capitalized
Interest
$
$
6,837
0
6,837
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