Interest during ConstructionDexter Construction Corporation is building a studentcondominium complex; it started construction on...Interest...

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Interest during Construction
Dexter Construction Corporation is building a studentcondominium complex; it started construction on January 1, Year 1.Dexter borrowed $1 million specifically for the project by issuinga 10%, 5-year, $1 million note, which is payable on December 31 ofYear 3. Dexter also had a 12%, 5-year, $3 million note payable anda 10%, 10-year, $1.8 million note payable outstanding all year.
In Year 1, Dexter incurred costs as follows:
Interest during Construction
Dexter Construction Corporation is building a studentcondominium complex; it started construction on January 1, Year 1.Dexter borrowed $1 million specifically for the project by issuinga 10%, 5-year, $1 million note, which is payable on December 31 ofYear 3. Dexter also had a 12%, 5-year, $3 million note payable anda 10%, 10-year, $1.8 million note payable outstanding all year.
In Year 1, Dexter incurred costs as follows:
January 1 $280,000
March 1 540,000
June 30 1,000,000
November 1 420,000
Calculate Dexter's capitalized interest on the studentcondominium complex for Year 1.
Calculate Dexter's capitalized interest on the studentcondominium complex for Year 1.
Required:
Prepare the journal entry to record Hemingway’s acquisition ofthe equipment.

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Solution:

Year 1: Weighted-Average accumulated expenditure and interest capitalized
Date	Expenditure	Weigh	Avearge
01-Jan	$2,80,000	12/12	$2,80,000
01-Mar	$5,40,000	10/12	$4,50,000
30-Jun	$10,00,000	6/12	$5,00,000
01-Nov	$4,20,000	2/12	$70,000

Accumulated Expenditure	$22,40,000		$13,00,000


Weighted average interest rate of all other debt
Debt	Amount	Interest rate	Interest amount
12% Note	$30,00,000	12%	$3,60,000
10% Note	$18,00,000	10%	$1,80,000
Totals	$48,00,000		$5,40,000
Weighted average rate (total interets/ total debt)		11.25%


Year 1: Interest Capitalized
		Average	Interest Rate	Capitalized Interest
Avearge Accumulated Expenditure		$13,00,000
Specific		$10,00,000	10.00%	$1,00,000
Other debt		$3,00,000	11.25%	$33,750

Total Interest Capitalized				$1,33,750

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In: AccountingInterest during ConstructionDexter Construction Corporation is building a studentcondominium complex; it started construction on...Interest during ConstructionDexter Construction Corporation is building a studentcondominium complex; it started construction on January 1, Year 1.Dexter borrowed $1 million specifically for the project by issuinga 10%, 5-year, $1 million note, which is payable on December 31 ofYear 3. Dexter also had a 12%, 5-year, $3 million note payable anda 10%, 10-year, $1.8 million note payable outstanding all year.In Year 1, Dexter incurred costs as follows:Interest during ConstructionDexter Construction Corporation is building a studentcondominium complex; it started construction on January 1, Year 1.Dexter borrowed $1 million specifically for the project by issuinga 10%, 5-year, $1 million note, which is payable on December 31 ofYear 3. Dexter also had a 12%, 5-year, $3 million note payable anda 10%, 10-year, $1.8 million note payable outstanding all year.In Year 1, Dexter incurred costs as follows:January 1$280,000March 1540,000June 301,000,000November 1420,000Calculate Dexter's capitalized interest on the studentcondominium complex for Year 1.Calculate Dexter's capitalized interest on the studentcondominium complex for Year 1.Required:Prepare the journal entry to record Hemingway’s acquisition ofthe equipment.