Matrix Inc borrowed 1 000 000 at 8 to finance the
Matrix Inc. borrowed $ 1,000,000 at 8% to finance the construction of a new building for its own use. Construction began on January 1, 2016, and was completed on October 31, 2016. Expenditures related to this building were:
January 1...... $ 252,000 (includes cost of purchasing land of $ 150,000)
May 1........ 310,000
July 1......... 420,000
October 31...... 276,000
In addition, Matrix had additional debt ( unrelated to the construction) of $ 500,000 at 9% and $ 800,000 at 10%. All debt was outstanding for the entire year.
Required:
1. Compute the amount of interest capitalized related to the construction of the building.
2. If the expenditures are assumed to have been incurred evenly throughout the year, compute weighted average accumulated expenditures and the amount of interest capitalized on the building.
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