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Avoidable Interest Calculation 1. Calculate the weighted average accumulated expenditures. On January 1, Year 1, XYZ Company began construction on a new manufacturing facility for its own use. The building was completed in Year 2. Construction expenditures incurred during Year 1 were as follows: January 1$500,000 March 1 - $600,000 July 31$480,000 September 30$600,000 December 31$300,000 2. Calculate the appropriate interest rate using either the specific interest method or the weighted average method. XYZ Company had the following debt obligations which were outstanding all of Year 1: A. Specific Interest Method - For the portion of the weighted-average accumulated expenditures that is = or the amount of the construction loan, then calculate a weighted average interest rate on all the other outstanding debt during the period. B. Weighted Average Method = calculate a weighted average interest rate on all the debt including the construction loan 3. Calculate the avoidable interest Avoidable Interest using the Specific Interest Method = Avoidable Interest using the Weighted Average Method = 4. Calculate the actual interest incurred during the period. 5. Choose the lower of avoidable interest or actual interest incurred