Interest during Construction Dexter Construction Corporation is building a student condominium complex; it started construction...
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Accounting
Interest during Construction
Dexter Construction Corporation is building a student condominium complex; it started construction on January 1, Year 1. Dexter borrowed $2.5 million on January 1 specifically for the project by issuing a 10%, 5-year, $2.5 million note, which is payable on December 31 of Year 3. Dexter also had a 12%, 5-year, $3 million note payable and a 10%, 10-year, $1.8 million note payable outstanding all year.
In Year 1, Dexter incurred costs as follows:
January 1
$300,000
March 1
600,000
June 30
1,000,000
November 1
480,000
Calculate Dexter's capitalized interest on the student condominium complex for Year 1.
Capitalized interest = $?
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To calculate the capitalized interest on the student condominium complex for Year 1 we need to follow these steps 1 Identify the total interest incurred on the specific loan for the project 2 Determine the weighted average accumulated expenditures AAE for the construction project 3 Calculate the capitalized interest based on the AAE and the applicable interest rates Step 1 Calculate Interest on Specific Loan Dexter borrowed 1 million at a 10 interest rate The interest for the year would be calculated as follows textInterest textPrincipal times
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