Outshine Ltd. begins construction of an education center on April 1, 2016 which
ID: 2562334 • Letter: O
Question
Outshine Ltd. begins construction of an education center on April 1, 2016 which is completed on July 31, 2017. The expenditures are as follows: 50 ecember 1, 201 201 30,2017 110,000 Outshine issues a $450,000 bond payable with an interest rate of 5% to finance the project which is outstanding during the entire construction period. In addition, the following general-purpose debts are outstanding: 6% 10-year bond due 2019 7% 20-year note due 2021 $1,000,000 $4,000,000 A) What is the weighted average accumulated expenditure in 2016? B) What is the weighted average interest rate on the two general debts? c What is the amount of interest to be capitalized in 2016? o What is the weighted average accumulated expenditure in 2017? E) What is the amount of interest to be capitalized in 2017? F) What is the total cost of the education center?Explanation / Answer
Answer A. Date Amount Weights Weigted Average Amt. 4/1/2016 250,000 9/9 250,000 7/31/2016 120,000 5/9 66,667 12/1/2015 70,000 1/9 7,778 Total 324,444 Answer B. Total Interest on two debts Debt Interest Rate Interest 1,000,000.00 6% 60,000 4,000,000.00 7% 280,000 Total 340,000 Weighted avg. Interest Rate = $340,000 / $5,000,000 Weighted avg. Interest Rate = 6.80% Answer C. Interest to be Capitalized = $324,444 X 5% X 9/12 Interest to be Capitalized = $12,166.65 or say $12,167 (Approx.) Answer D. Date Amount Weights Weigted Average Amt. 2016 Expenditure + Interest Capitalized 452,167 7/7 452,167 1/31/2017 50,000 6/7 42,857 6/30/2017 110,000 1/7 15,714 Total 510,738
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