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PROBLEM 10-7

PROBLEM 10-7 - Loans Outstanding During Construction Period...

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PROBLEM 10-7 (a) Computation of Weighted-Average Accumulated Expenditures Expenditures Date Amount X Capitalization Period = Weighted-Average Accumulated Expenditures July 30, 2007 \$1,200,000 10/12 \$1,000,000 January 30, 2008 1,500,000 4/12 500,000 May 30, 2008 1,300,000 0 0 \$4,000,000 \$1,500,000 (b) Weighted-Average Accumulated Expenditures Weighted-Average Interest Rate Avoidable interest \$1,500,000 X 13%* = \$195,000

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Unformatted text preview: Loans Outstanding During Construction Period Principal Actual Interest *14.5% five-year note \$2,000,000 \$290,000 12% ten-year bond 3,000,000 360,000 \$5,000,000 \$650,000 Total interest \$650,000 Total principal = \$5,000,000 = 13% (weighted-average rate) (c) (1) and (2) Total actual interest cost \$650,000 Total interest capitalized \$195,000 Total interest expensed \$455,000...
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