Answer:
$291,000
Explanation:
First, we need to calculate the weighted average expenditure. the Weighted average expenditure is calculated and attached with the answer in PDF format please find it.
Now calculate the Average interest rate on General debt
Average interest rate on General debt = [ ( $7,000,000 x 14% ) + ( $3,000,000 x 9% ) ] / ( $7,000,000 + $3,000,000 ) = [ $980,000 + $270,000 ] / $10,000,000 = $1,250,000 / $10,000,000 = 0.125 = 12.5%
Now the specific loan of $2,350,000 is utilised and the remianing value of expenditure is $636,000 ($2,986,000 - $2,350,000) fromgeneral debt is utilized for the costruction purpose. The interest on both loan should be capitalised.
Interest capitalized = ( $2,350,000 x 9% ) + ( $636,000 x 12.5% ) = $211,500 + $79,500 = $291,000
