Question: On March 1, 2020, Kent Corp. started construction on a new production facility. To finance the project, on January 1, 2020, Kent Corp. borrowed $4,000,000

On March 1, 2020, Kent Corp. started construction on a new production facility. To finance the project, on January 1, 2020, Kent Corp. borrowed $4,000,000 as a construction loan that is collateralized by the new facility. The 8% construction loan is due in 5 years and interest is due annually on December 31. Kent Corp. made the following expenditure payments to the contractor during 2020. The project is expected to be completed during 2027.

March 1, 2020, $ 2,000,000

April 1, 2020, 3,000,000

August 1, 2020, 5,000,000

September 1, 2020, 1,000,000

Kent Corp. had the following debt outstanding during 2020 in addition to the construction loan:

7%, 10 year bond payable, due 5/31/22, $ 12,000,000

10%, 20 year note payable, due 8/31/24, 28,000,000

1. Compute weighted average accumulated expenditures for 2020.

2. Compute weighted average interest rate for 2020.

3. Compute avoidable interest for 2020.

4. Compute actual interest incurred for 2020.

5. Compute interest to be capitalized for 2020.

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