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

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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