Answer:
$86,805
Explanation:
For computing the interest capitalized for 2017 we need to do following calculations
Average accumulated expenditures for year 2016 is
= (Jan 1 expenditure × number of months ÷ total number of months) + (Sep 1 expenditure × number of months ÷ total number of months) + (Dec 31 expenditure × number of months ÷ total number of months)
= (200,000 × 12 ÷ 12) + (300,000 × 4 ÷ 12) + (300,000 × 0 ÷ 12)
= 200,000 + 100,000 + 0
= $300,000
Now
Interest capitalized for 2016 was:
= (Jan 1 expenditure × number of months ÷ total number of months) + (Sep 1 expenditure × number of months ÷ total number of months) + (Dec 31 expenditure × number of months ÷ total number of months) × interest on construction loan
= (200,000 × 12 ÷ 12) + (300,000 × 4 ÷ 12) + (300,000 × 0 ÷ 12) × 12%
= $300,000 × 12%
= 36,000
Now
Average accumulated expenditures for 2017 was:
Accumulated expenditure in 2016 is
= (Jan 1 expenditure + Sep 1 expenditure + Dec 1 expenditure + interest capitalized) × number of months ÷ total number of months
= (200,000 + 300,000 + 300,000 + 36,000) × 9 ÷ 9
= (836,000) × 9 ÷9
= 836,000
And,
March 31, 2017 = 300,000 × 6 ÷9 = 200,000
September 30, 2017 = 200,000 × 0 ÷ 9 = 0
So,
Average accumulated expenditures for 2017 was
= 836,000 + 200,000 + 0
= 1,036,000
Finally
Interest capitalized for 2017 was:
Specific borrowing is
= 750,000 × 9 ÷ 12 × 12%
= 67,500
Therefore
Excess = (Accumulated expenditure in 2017) – (Total borrowing in 2016)
= (1,036,000 - 750,000) × number of months ÷ total number of months × bond payable discount
= 286,000 × 9 ÷ 12 × 9%
= 19,305
Hence,
Interest capitalized for 2017
= 67,500 + 19,305
= 86,805
