On December 31, 2013, Main Inc. borrowed $3,570,000 at 13% payable annually to f
ID: 2464401 • Letter: O
Question
On December 31, 2013, Main Inc. borrowed $3,570,000 at 13% payable annually to finance the construction of a new building. In 2014, the company made the following expenditures related to this building: March 1, $428,400; June 1, $714,000; July 1, $1,785,000; December 1, $1,785,000. The building was completed in February 2015. Additional information is provided as follows. Other debt outstanding 10-year, 12% bond, December 31, 2007, interest payable annually $4,760,000 6-year, 11% note, dated December 31, 2011, interest payable annually $1,904,000 March 1, 2014, expenditure included land costs of $178,500 Interest revenue earned in 2014 $58,310 Determine the amount of interest to be capitalized in 2014 in relation to the construction of the building.(Round answer to 0 decimal places, e.g. 5,275.) The amount of interest $____________Explanation / Answer
1
2
3
4=2 x 3
Date
Expenditure
Weightage
WTD invenstment
1-Mar
428,400
0.8333
357,000
1-Jun
714,000
0.5833
416,500
1-Jul
1,785,000
0.5000
892,500
1-Dec
1,785,000
0.0833
148,750
Total
1,814,750
Weightage= Remaining months/ Total Months
Other Interest
Borrowings
Interest Rate
Interest
4,760,000
0.12
571,200
1,904,000
0.11
209,440
6,664,000
0.117142857
780,640
Average interest= 780,640/6,664,00 =0.117142
Construction
1,000,000
0.13
130,000
814,750
0.117142857
95,442
Capitize interest
225,442
Actual Interest paid
Borrowings
Interest Rate
Interest
4,760,000
0.12
571,200
1,904,000
0.11
209,440
1,000,000
0.13
130,000
Total
910,640
Amount of Interest to be capitazed is $225,442
1
2
3
4=2 x 3
Date
Expenditure
Weightage
WTD invenstment
1-Mar
428,400
0.8333
357,000
1-Jun
714,000
0.5833
416,500
1-Jul
1,785,000
0.5000
892,500
1-Dec
1,785,000
0.0833
148,750
Total
1,814,750
Related Questions
drjack9650@gmail.com
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.