Self-Constructed Assets Problem:

Given Information:

On January 1, 2019, the Cool Company began construction of a building to be used as its office headquarters. The building was completed on October 31, 2018. The firm incurred $1,700,000 and 1,775,000 expenditures in 2019 and 2020, respectively.

On January 1, 2019, the company obtained a $2 million construction loan with a 9% interest rate. The loan was outstanding all of 2019 and 2020. The company's other interest-bearing debt included two long-term notes of $4,000,000 and $6,000,000 with interest rates of 6% and 7%, respectively. Both notes were outstanding during all of 2019 and 2020. Interest is paid annually on all debt. The company's fiscal year-end is December 31.

Required:

What is the interest rate if the specific interest methodis used?

What is the interest rate if the weighted-average methodis used?

Find weighted average expenditures and interest to be capitalized in 2019 and 2020 if:

a. Expenditures were incurred evenly throughout the year and Cool Company uses the specific interest method.

b. Expenditures were incurred beginning of each year and Cool Company uses the weighted average method.

c. Expenditures were incurred at the following times during the year and Cool Company uses the specific interest method:

Date	Expenditures
1/1/2019	1,100,000
3/1/2019	20,000
6/30/2019	550,000
10/1/2019	30,000
1/31/2020	500,000
4/30/2020	375,000
8/31/2020	900,000

4. Determine the initial valuation for the constructed building in part 3c.