Reference no: EM133109115
Question - Groover Industries began construction of a factory building on January 1, 2017. Construction continued throughout 2017 and the building was finished on December 31, 2017. The following amounts were spent on the building on:
January 1, 2017 $1,600,000
May 1, 2017 850,000
August 31, 2017 700,000
October 1, 2017 850,000
Total $4,000,000
On January 1, 2017, Groover borrowed $1,500,000 from First State bank specifically for this construction through a loan bearing interest at 8% annually and maturing in 5 years. Groover had two other long-term notes payable outstanding for the entire year: a $1,000,000 note with an interest rate of 10% and a $3,000,000 note with an interest rate of 9%.
Required -
1. Compute the weighted average accumulated expenditures for the factory building for 2017.
2. Compute actual interest for 2017.
3. Compute avoidable interest for 2017.
4. How much interest should be capitalized in 2017?
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