Wildhorse Company is constructing a building. Construction began on February 1 a

Question

Wildhorse Company is constructing a building. Construction began on February 1 and was completed on December 31. Expenditures were $1,944,000 on March 1, $1,224,000 on June 1, and $3,046,410 on December 31.

Wildhorse Company borrowed $1,191,160 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 9%, 5-year, $2,480,600 note payable and an 10%, 4-year, $3,847,200 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

______%

Explanation / Answer

SOLUTION

Weighted average interest rate = Total interest / Total notes payable

= $737,016 / $7,518,960 = 9.80%

Notes payable ($) Interest period Interest rate Interest amount ($) March 1 1,191,160 10 months 13% 129,042 Opening 2,480,600 1 year 9% 223,254 Opening 3,847,200 1 year 10% 384,720 7,518,960 737,016

Related Questions

Navigate

• Browse (All)
• Browse W
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.