Calculation of Avoidable Interest Weighted Average Quarterly Accumulated Avoidable Debt Category Expenditures Interest Rate Interest Specific Debt $ General Debt 5,120,000 9,280,000 0.025 $ 128000 0.0318 295104 Total $ 14,400,000 $ 423,104 1. Capitalized Interest $ 423,104 2. Interest expense $ 81,896 x b. Prepare the entry to record the construction expenditures and the interest for the first quarter. Assume all payments are in cash. Account Name Construction in Process Interest Expense Cash To record construction expenditures and interest. Dr. 423,104 Cr. 0 x 81,896 0 0 x 504,800 x Computing and Recording Interest Capitalization Bullock Company is constructing a building for its own use and has been capitalizing interest based on average expenditures on a quarterly basis since the project began last year. The following expenditures are made during the first quarter: January 1, $8,960,000; February 1, $8,160,000; and March 31, $11,680,000. Bullock had the following debts outstanding during this quarter. Debt Amount Note payable, 10%, incurred specifically to finance construction $5,120,000 Short-term note payable, 15% Mortgage note payable, 8% 8,000,000 3,810,000 a. Compute (1) interest to be capitalized and (2) interest to be expensed for this first quarter. Calculation of Actual Interest for the First Quarter Debt Debt Amount Annual Quarterly Interest rate Interest Amount Specific Det Construction loan $ 5,120,000 10% $ 128,000 General Debo Note payable Mortgage note payable $8,000,000 3,840.000 15% $ 300,000 8% 76,800 Total $ 501800 Calculation of Weighted Average Accumulated Expenditures for First Quarter Expenditures Months Outstanding WA Accum. Expenditures Date January 1 S 8,960,000 February 1 March 31 8,160.000 11,680,000 Tota 35 2 8,960.000 5,110.000 0 D $ 1440 DOD