On January 1, 2018, the Highlands Company began construction on a new manufactur

Question

On January 1, 2018, the Highlands Company began construction on a new manufacturing facility for its own use. The building was completed in 2019, The company borrowed $1,750,000 at 8% on January 1 to help finance the construction. In addition to the construction loan, Highlands had the following debt outstanding throughout 2018: $8,000,000, $2,000,000, 13% bonds 88 long-term note Construction expenditures incurred during 2018 were as follows: January 1 March 31 June 30 September 30 December 31 $ 760,000 1,360,000 992,000 760,000 560,000 Required: Calculate the amount of interest capitalized for 2018 using the specific interest method. (Do not round the intermediate calculations. Round your percentage answers to 1 decimal place (i.e. 0.123 should be entered as 12.3%).)

Explanation / Answer

Average Interest Rate =(104000+160000)/(8000000+2000000) =12%

Interest Capitalized

Expenditure Weight Average 760000 12/12 760000 1360000 9/12 1020000 992000 6/12 496000 760000 3/12 190000 560000 0 0 Expenditure Weight Average 2466000

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