Question

On March 1, 2019, Asbah contracted Nabali & Fares Construction Co. to construct a building on land costing $800,000 (purchased from the contractor and included in the first payment). The construction began on the office building on March 1. The following expenditures were incurred for construction: Date Expenditures March 1, 2019 $ 1,200,000 May 1, 2019 1,680,000 August 1, 2019 3,000,000 September 30, 2019 4,800,000 The building was completed and ready for occupancy on September 30, 2019. To finance purchase of the land and construction of the building, $1,500,000 was borrowed on March 1, 2019 on a 9%, 3-year note payable. Other than the construction note, the only debt outstanding during 2019 was a $1,000,000, 12%, 6-year note payable dated January 1, 2019. The interest cost to be capitalized during 2019 i

Answer 1

Date	Expenses	No of Days before Use i.e 30th Sept 2019	Average Amount Used		Working
1-Mar-19	1,200,000	214	1,200,000		1200000*214/214
1-May-19	1,680,000	153	1,201,121.50		1680000*153/214
1-Aug-19	3,000,000	61	855,140		3000000*61/214
30-Sep-19	4,800,000	1	22,430		4800000*1/214
Total	10,680,000		3,278,692
Borrowings Details
Particular	Amount	Interest Rate	Interest Amount
9%, 3-year note payable	1,500,000	9%	79,151		1500000*9%*214/365
12%, 6-year note payable	1,000,000	12%	70,356		1000000*12%*214/365
Total	2,500,000		149,507
	Average Interest Rate	6%		149507*100/2500000
	Interest Amount to be Capitalized	196,074.74		3278692*6%