# Interest During ConstructionMatrix Inc. borrowed \$1,100,000 at 8% to finance the construction of a new building for its own use. Construction began on January 1, 2019, and was completed on October 31, 2019. Expenditures related to this building were:January 1\$258,000(includes cost of purchasing land of \$150,000)May 1320,000 July 1450,000 October 31275,000 In addition, Matrix had additional debt (unrelated to the construction) of \$500,000 at 9% and \$800,000 at 10%. All debt was outstanding for the entire year.Required:Compute the amount of interest capitalized related to the construction of the building.\$If the expenditures are assumed to have been incurred evenly throughout the year:Compute weighted average accumulated expenditures\$Compute the amount of interest capitalized on the building\$

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1. Interest During Construction

Matrix Inc. borrowed \$1,100,000 at 8% to finance the construction of a new building for its own use. Construction began on January 1, 2019, and was completed on October 31, 2019. Expenditures related to this building were:

 January 1 \$258,000 (includes cost of purchasing land of \$150,000) May 1 320,000 July 1 450,000 October 31 275,000

In addition, Matrix had additional debt (unrelated to the construction) of \$500,000 at 9% and \$800,000 at 10%. All debt was outstanding for the entire year.

Required:

1. Compute the amount of interest capitalized related to the construction of the building.
\$
2. If the expenditures are assumed to have been incurred evenly throughout the year:
Compute weighted average accumulated expenditures
\$

Compute the amount of interest capitalized on the building
\$

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Step 1

1. Capitalized interest-construction loan of \$1,100,000:

Step 2

Note: Interests costs (if any) capitalized are included as a part of the cost of the building, not the part of the land.

Step 3

Calculate the avoidable inte...

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