Tamarisk Company is constructing a building. Construction began on February 1 an

Question

Tamarisk Company is constructing a building. Construction began on February 1 and was completed on December 31. Expenditures were $1,908,000 on March 1, $1,308,000 on June 1, and $3,002,130 on December 31.

Tamarisk Company borrowed $1,197,510 on March 1 on a 5-year, 12% note to help finance construction of the building. In addition, the company had outstanding all year a 10%, 5-year, $2,487,900 note payable and an 11%, 4-year, $3,271,400 note payable. Compute the weighted-average interest rate used for interest capitalization purposes. (Round answer to 2 decimal places, e.g. 7.58%.)

Explanation / Answer

Thus weighted average interest rate used for interest capitalization purposes = 608644/5759300

= 10.57%

Particulars Principal (in $) Interest (in $) 10% and 5 years notes payable 2,487,900.00 248,790.00 11% and 4 years notes payable 3,271,400.0 359,854.0 Total 5,759,300.00 608,644.00

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