Question

Wildhorse Company is constructing a building. Construction began on February 1 and was completed on December 31. Expenditures were $1,812,000 on March 1, $1,212,000 on June 1, and $3,007,840 on December 31.

Wildhorse Company borrowed $1,004,930 on March 1 on a 5-year, 13% note to help finance construction of the building. In addition, the company had outstanding all year a 10%, 5-year, $2,200,900 note payable and an 11%, 4-year, $3,365,100 note payable. Compute the weighted-average interest rate used for interest capitalization purposes. (Round answer to 2 decimal places, e.g. 7.58%.)

Weighted-average interest rate:
Concord Company is constructing a building. Construction began on February 1 and was completed on December 31. Expenditures were $1,920,000 on March 1, $1,200,000 on June 1, and $3,070,300 on December 31.

Concord Company borrowed $1,041,900 on March 1 on a 5-year, 13% note to help finance construction of the building. In addition, the company had outstanding all year a 10%, 5-year, $2,227,300 note payable and an 11%, 4-year, $3,799,000 note payable. Compute avoidable interest for Concord Company. Use the weighted-average interest rate for interest capitalization purposes. (Round percentages to 2 decimal places, e.g. 2.51% and final answer to 0 decimal places, e.g. 5,275.)

Avoidable interest:

Answer 1

Answer:

10.63%

Explanation:

Weighted average interest rate for interest capitalization purposes.

10%, 5-year, $2,227,300 note payable

11%, 4-year, $3,799,000 note payable.

Principal

$2,227,300

$3,799,000

Total $6,026,300

Interest

10% × $2,227,300 =$222,730

11% ×$3,799,000 =$417,890

Total $640,620

Weighted average interest rate

$640,620/$6,026,300

=10.63%

Weighted average interest rate for interest capitalization purposes.

Expenditures

March 1 $1,812,000

June 1 $1,212,000

December 31 $3,007,840

Total $6,031,840

Capitalization period ×Expenditure =Weighted average accumulated period

10/12 ×$1,812,000 =$1,510,000

7/12×$1,212,000=$707,000

0

Total $2,217,000

Therefore the weighted-average interest rate for interest capitalization purpose is 10.63%