Answer: $177,750
Explanation:
January 1st
Construction expenditure 600,000
outstanding interest 12/12= 1
Accumulated expenditure= 600,000
x1 = $600,000
March 31
Construction expenditure = 1,200,000
outstanding interest 9/12=3/4
Accumulated expenditure= 3/4x1,200,000=$ 900.000
June 30
construction expoenditure= 800,000
outstanding interest= 6/12=1/2
Accumulated expenditure= 1/2 x 800000= $400000
September 30
construction expenditure=600,000
outstanding interest=3/12
Accumulated expenditure- 1/4 x600,000=$150,000
December 31
Construction expenditure= 400,000
outstanding interest =0/12
Accumulated expenditure=0
Total of the average accumulated expenditure =$2,050,000
Weighted average on other debts
Bonds interest of 12% for $5,000,000= $600,000
Long term note = 8% for $3,000,000 =240,000
Total = $840,000
weighted average =$840,000/(3,000,000 + 5,000,000)
= 840,000/8,000,000= 10.5%
Amount of difference =average accumulated expenditure- construction loan
=$2,050,000- $1,500,000
=$550,000
Interest on difference =10.5/100 x $550,000
=$57,750
Interest on amount on construction loan= 8/100 x $1,500,000
= $120,000
Amount of interest capitalized = interest on construction loan + interest on amount obtained from difference of accumulated expenditure and construction loan = $120,000+ $57,750 = $177,750
