1.Pearl Company is constructing a building. Construction began on February 1 and
ID: 2571430 • Letter: 1
Question
1.Pearl Company is constructing a building. Construction began on February 1 and was completed on December 31. Expenditures were $1,968,000 on March 1, $1,248,000 on June 1, and $3,008,710 on December 31. Compute Pearl’s weighted-average accumulated expenditures for interest capitalization purposes.
Weighted-Average Accumulated Expenditures
$
2.Concord Company is constructing a building. Construction began on February 1 and was completed on December 31. Expenditures were $1,800,000 on March 1, $1,200,000 on June 1, and $3,097,420 on December 31.
Concord Company borrowed $1,050,550 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 10%, 5-year, $2,080,800 note payable and an 11%, 4-year, $3,831,200 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
Date Amount Time Weighted-Average Expenditures Mar-01 1968000 10/12 1640000 Jun-01 1248000 7/12 728000 Dec-31 3008710 0 0 2368000 Weighted-average accumulated expenditures = 2368000 2 Principal Interest 10%, 5-year 2080800 208080 11%, 4-year 3831200 421432 Total 5912000 629512 Weighted-average interest rate = 629512/5912000= 10.65%
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