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, $690,000; March 31, $790,000; June 30, $590,000; October 30, $1,170,000. The company arranged a 10% loan on January 1 for $1,080,000. Assume the $1,080,000 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 6%, respectively.

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
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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, $690,000; March 31, $790,000; June 30, $590,000; October 30, $1,170,000. The company
arranged a 10% loan on January 1 for $1,080,000. Assume the $1,080,000 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 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
Expenditure
$
$
Amount
0
0
Weight
Interest Rate
%
%
=
=
=
=
=
=
$
Capitalized
Interest
$
Average
$
0
0
0
0
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, $690,000; March 31, $790,000; June 30, $590,000; October 30, $1,170,000. The company arranged a 10% loan on January 1 for $1,080,000. Assume the $1,080,000 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 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 Expenditure $ $ Amount 0 0 Weight Interest Rate % % = = = = = = $ Capitalized Interest $ Average $ 0 0 0 0
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