Please help within an hour! THank you! On January 1, 2018, the Highlands Company
ID: 2595718 • Letter: P
Question
Please help within an hour! THank you!
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 $2,000,000 at 13% on January 1 to help finance the construction. In addition to the construction loan, Highlands had the following debt outstanding throughout 2018 $5,000,000, $3,000,000, 17% 13% bonds long-term note Construction expenditures incurred during 2018 were as follows January 1 March 31 June 30 September 30 December 31 $ 820,000 1,420,000 1,064,000 820,000 620,000 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 (ie. 0.123 should be entered as 12.3%.) Date Expenditure Weight Average January 1 March 31 June 30 September 30 December 31 Accumulated expenditure apitalize Interest Average Interest Rate Average accumulated expendituresExplanation / Answer
Date
Expenditure
weight
Average
Jan-01
8,20,000
*
12/12=1
=
8,20,000
Mar-31
14,20,000
*
9/12=0.75
=
10,65,000
Jun-30
10,64,000
*
6/12=0.5
=
5,32,000
Sep-30
8,20,000
*
3/12=0.25
=
2,05,000
Dec-31
6,20,000
*
0/12=0
=
0
accumulated expenditure
47,44,000
26,22,000
Average
interest rate
capitalized interest
Average accumulated expenditure
$2,622,000
construction loan
$2,000,000
*
13
%
$260,000
others loans (not constructed)
$622,000
*
15.5
%
$96,410
$356,410
Capitalised interest = $356,410
Note : bonds = 5,000,000*17% = 850,000
Long term note =3,000,000*13% = 390,000
= (850,000+390,000)/(5,000,000+3,000,000) = 15.5%
Date
Expenditure
weight
Average
Jan-01
8,20,000
*
12/12=1
=
8,20,000
Mar-31
14,20,000
*
9/12=0.75
=
10,65,000
Jun-30
10,64,000
*
6/12=0.5
=
5,32,000
Sep-30
8,20,000
*
3/12=0.25
=
2,05,000
Dec-31
6,20,000
*
0/12=0
=
0
accumulated expenditure
47,44,000
26,22,000
Average
interest rate
capitalized interest
Average accumulated expenditure
$2,622,000
construction loan
$2,000,000
*
13
%
$260,000
others loans (not constructed)
$622,000
*
15.5
%
$96,410
$356,410