Year 2021

Months outstanding from Capitalization

Date of Construction expenses made Amount Paid the date of payment to Dec
period C = B/12
2021
January 01, 2021 1,500,000 12 months 12/12
March 01, 2021 1,200,000 10 months 10/12
June 30, 2021 1,400,000 6 months 6/12
October 01, 2021 1,200,000 3 months 3/12
Total 5,300,000

Construction Loan interest rate 14%

Interest to be capitalized (3,500,000 × 14%) $ 490,000

Calculation of Interest expense

Description Loan Amount Interest rate Interest Amount
[A] [B] [A × B]
Construction Loan amount 4,000,000 14% $ 560,000
10% Notes 1,000,000 10% 100,000
12% Notes 4,000,000 12% 480,000
Total Interest $ 1,140,000
Less: Capitalized Interest Amount (490,000)
Interest Expense $ 650,000

In Year 2022
Beginning Expenditure cost (5,300,000 + 490,000) = 5,790,000
Calculation of Weighted Average Accumulated Expenditure
Months outstanding from
Capitalization
Date of Construction expenses made Amount Incurred the date of payment to 30
September 2022 period C = B/9

January 01, 2022 5,790,000 9 Months 9/9

January 31, 2022 360,000 8 Months 8/9
April 30, 2022 693,000 5 Months 5/9
August 31, 2022 990,000 1 Months 1/9
Total 7,833,000

Weighted Average of All long-term debt

Loan Amount Interest % Interest cost
[A] [B] [A × B]
10% Notes 1,000,000 10% 100,000
12% Notes 4,000,000 12% 480,000
5,000,000 580,000
Average interest rate (580,000 / 5,000,000) 11.60%

Calculation of Interest to be capitalized for 9 Months

Total Average Accumulated Expenditures 6,605,000
Amount Interest rate
[A] [B]
Construction Loan $ 4,000,000 14.00%
Remaining Loan (6,605,000 - 4,000,000) 2,605,000 11.60%
Interest to be captialized $ 6,605,000

Interest Expense
Total Interest 1,140,000
Less: Capitalized Interest (646,635)
Interest expense 493,365

2021 2022
Interest capitalized $ 490,000 $ 646,635
Interest expense $ 650,000 $ 493,365
Average Accumulated Expenditures
D = (A × C)

(1,500,000 × 12/12) 1,500,000

(1,200,000 × 10 /12) 1,000,000
(1,400,000 × 6/12) 700,000
(1,200,000 × 3 /12) 300,000
3,500,000

Average Accumulated Expenditures

D = (A × C)

(5,790,000 × 9/9) 5,790,000

(360,000 × 8/9) 320,000
(693,000 × 5/9) 385,000
(990,000 × 1/9) 110,000
6,605,000
Interest cost
[A × B] × 9/12
$ 420,000
226,635
$ 646,635
2) Cost of Building

Expenditures incurred in 2021

January 01, 2021 $ 1,500,000
March 01, 2021 1,200,000
June 30, 2021 1,400,000
October 01, 2021 1,200,000 $ 5,300,000
Add: Interest cost capitalized in 2018 490,000
Expenditures incurred in 2022
January 31, 2022 $ 360,000
April 30, 2022 693,000
August 31, 2022 990,000 2,043,000
Add: Interest cost capitalized in 2019 646,635
Total Cost of Building $ 8,479,635

Total cost of Building $ 8,479,635

Year 2018
Calculation of Weighted Average Accumulated Expenditure
Months
Capitaliza
outstanding
Date of Construction tion Weighted Average Accumulated Expenditures
Amount Paid from the date
expenses made period C = D = (A * C)
of payment to
B/12
Dec 2018
January 01, 2018 1,000,000 12 months 12/12 (1,050,000 * 12/12)
March 01, 2018 600,000 10 months 10/12 (870,000 * 10 / 12)
June 30, 2018 800,000 6 months 6/12 (390,000 * 6/12)
October 01, 2018 600,000 3 months 3/12 (690,000 * 3 /12)
Total 3,000,000

Calculation of Weighted Average all debt

Amount of LoaRate of IntInterest Amount
[A] [B] [A*B]
$ 3 Million construction Loan 3,000,000 10% 300,000
5% long term notes 4,000,000 6% 240,000
7 % long term notes 6,000,000 8% 480,000
Total 13,000,000 1,020,000
Weighted Averagae rate of All debts (1,148,000 / 14 7.85%

Interest to be capitalized in year 2018 (Average accumulated expenditure × Weighted average rate)
( 2,142,500 × 7.76%)
$ 160,925

In Year 2019
Beginning Expenditure cost (3,000,000 + 166,258) = (3,166,258)
Calculation of Weighted Average Accumulated Expenditure

Months
outstanding Capitaliza
Date of Construction from the date tion Weighted Average Accumulated Expenditures
Amount Incurred
expenses made of payment to period C = D = (A * C)
30 September B/9
2019

January 01, 2019 3,160,925 9 Months 9/9 (3,166,258 * 9/9)

January 31, 2019 270,000 8 Months 8/9
April 30, 2019 585,000 5 Months 5/9 (990,000 * 5/9)
August 01, 2019 900,000 1 Months 1/9 (1,710,000 * 1/9)
Total 4,915,925

Interest to be capitalized in year 2019 (Average accumulated expenditure × Weighted average rate × 9 /12 )
( 2,142,500 × 7.76% × 9 /12 )
$ 225,251
Amount of Interest Capitalized
in 2018 $ 160,925
in 2019 $ 225,251
 Average Accumulated Expenditures
D = (A * C)

1,000,000
500,000
400,000
150,000
2,050,000

× Weighted average rate)

Average Accumulated Expenditures

D = (A * C)

3,160,925
240,000
325,000
100,000
3,825,925

× Weighted average rate × 9 /12 )

Expenditures incurred in 2018
January 01, 2021 1,000,000
March 01, 2021 600,000
June 30, 2021 800,000
October 01, 2021 600,000 3,000,000
Add: Interest cost capitalized in 2018 160,925
Expenditures incurred in 2019
January 31, 2022 270,000
April 30, 2022 585,000
August 31, 2022 900,000 1,755,000
Add: Interest cost capitalized in 2019 225,251
Total Cost of Building 5,141,176

3) Amount of Interest Expense

In Year 2018
Total Interest 1,020,000
Less: Interest capitalized in 2 (160,925)
Interest expense 859,075

In Year 2019
Total Interest 1,020,000
Less: Interest capitalized in 2 (225,251)
Interest expense 794,749