Answer:
interest capitalized during 2018 = $29,000
interest capitalized during 2019 = $14,000
Explanation:
current outstanding liabilities:
$6,000,000, 8% note
$9,000,000, 3% bonds
construction related expenditures:
July 1, 2018 $580,000
September 30, 2018 $870,000
November 30, 2018 $870,000
January 30, 2019 $810,000
interest capitalized for 2018:
July 1, 2018 $580,000 x 6/12 = $290,000
September 30, 2018 $870,000 x 3/12 = $217,500
November 30, 2018 $870,000 x 1/12 = $72,500
total weighted accumulated expenditures = $580,000
weighted interest rate:
$6/$15 x 8% = 3.2%
$9/$15 x 3% = 1.8%
total weighted interest = 5%
interest capitalized during 2018 = $580,000 x 5% = $29,000
interest capitalized for 2018:
January 1, 2019 $580,000 x 3/12 = $145,000
January 30, 2019 $810,000 x 2/12 = $135,000
total weighted accumulated expenditures = $280,000
interest capitalized during 2019 = $280,000 x 5% = $14,000
