Question

Hawkins Corporation began construction of a motel on March 31, 2021. The project was completed on April 30, 2022. No new loans were required to fund construction. Hawkins does have the following two interest-bearing liabilities that were outstanding throughout the construction period:

$4,100,000, 6% note
$16,740,000, 10% bonds

Construction expenditures incurred were as follows:

March 31, 2021	$	4,090,000
June 30, 2021		6,090,000
November 30, 2021		1,818,000
February 28, 2022		3,090,000

The company’s fiscal year-end is December 31.

Required:
Calculate the amount of interest capitalized for 2021 and 2022. (Round weighted average interest rate to 2 decimal places and final answers to the nearest whole dollar.)

Answer 1

Calculation of Interest amount Capitalized During 2021 & 2022
Date	No of Months	Amount	Interest
			@9.21%
April 1st 2021	12	$       40,90,000	$       3,76,814
June 30th 2021	9	$       60,90,000	$       4,20,806
November 30th 2021	4	$       18,18,000	$           55,831
Feb 28th 2022	1	$       30,90,000	$           23,724
		$   1,50,88,000	$       8,77,175
Interest Capitalized During 2021 is	$       8,77,175
Interest Capitalized During 20212 is	$       1,15,839
Interest		Expended*1month*9.21%
		15088000*9.21%*1/12
		$         1,15,839
Calaculation of Weighted Average Borrowing Rate
Loan	Rate	Interest
$       41,00,000	6%	$         2,46,000
$   1,67,40,000	10%	$       16,74,000
$   2,08,40,000		$       19,20,000
W.Average Int Rate	= Total Interest/Total Loan
		=1920000/20840000
		9.21%