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On January 1, 2018, the Shagri Company began construction on a new manufacturing facility for its...

On January 1, 2018, the Shagri Company began construction on a new manufacturing facility for its own use. The building was completed in 2019. The only interest-bearing debt the company had outstanding during 2018 was long-term bonds with a book value of $11,500,000 and an effective interest rate of 10%. Construction expenditures incurred during 2018 were as follows:

January 1 $ 650,000
March 1 690,000
July 31 570,000
September 30 750,000
December 31 450,000
Date Expenditure Weight Average
January 1 x =
March 1 x =
July 31 x =
September 30 x =
December 31 x =
Accumulated expenditure $0 $0
Average Interest Rate Capitalized Interest
Average accumulated expenditures $0 x % = $0
Business   Accounting   
0 0
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Answer #1
Date Expenditure X Weight = Average
Jan-01 $     6,50,000 X 12/12 = $    6,50,000
Mar-01 $     6,90,000 X 10/12 = $    5,75,000
Jul-31 $     5,70,000 X 5/12 = $    2,37,500
Sep-30 $     7,50,000 X 3/12 = $    1,87,500
Dec-31 $     4,50,000 X 0/12 = $ -  
Accumulated expenditure $ 31,10,000 $ 16,50,000
Average X Interest rate = Capitalized interest
Average accumulated expenditure $ 16,50,000 X 10% = $    1,65,000
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