1. Calculate the amount of interest that Mason should capitalize in 2016 and 2017 using the weighted-average method.
| Expenditure for 2016 | |||
| January 1 ,2016 | 1710000 | ,12/12 | 1710000 |
| March 1,2016 | 1320000 | ,10/12 | 1100000 |
| June 30,2016 | 1520000 | ,6/12 | 760000 |
| Octomber 1,2016 | 1320000 | ,3/12 | 330000 |
| Accumulated Expenditure before interest | 5870000 | ||
| Average Accumulated Depriciation | 3900000 |
$3,900,,000 x 16% = $624,000 = Interest capitalized in 2016
| Expenditure for 2017 | |||
| January 1 ,2017 | 6494000 | ,9/9 | 6494000 |
| January 31 ,2017 | 378000 | ,8/9 | 336000 |
| April 30,2017 | 711000 | ,5/9 | 395000 |
| August 31,2017 | 1008000 | ,1/9 | 112000 |
| Accumulated Expenditure before interest | 8591000 | ||
| Average Accumulated Depriciation | 7337000 |
| Weighted-average rate of all other debt: | |||
| 4,000,000 x 12% | 480000 | 1320000 | |
| 6,000,000 x 14% | 840000 | 10000000 | |
| 10000000 | 1320000 | 0.132 |
| Interest capitalized: | |
| 4200000 x 16% x 9/12 | 504000 |
| 3137000×13.2%x9/12 | 310563 |
| Interest Capitalized in 2017 | 814563 |
| Particular | Amount in $ |
| Cost of Building: | |
| Expenditures in 2016 | 5870000 |
| Interest capitalized in 2016 | 624000 |
| Expenditures in 2017 | 2097000 |
| Interest capitalized in 2017 | 814563 |
| Total cost of building | 9405563 |
| Interest Expense for 2016 | |
| 4200000*16% | 672000 |
| 4000000*12% | 480000 |
| 6000000*14% | 840000 |
| Total Interest Incurred | 1992000 |
| Less : | |
| Capitalized in 2016 | 624000 |
| 2016 Expenditure | 1368000 |
| Total Interest Incurred | 1992000 |
| Less : | |
| Capitalized in 2017 | 814563 |
| 2017 Expenditure | 1177437 |
