Nash company is constructing a building. construction began on february 1 and was completed on december 31. expenditures were $1,884,000 on march 1, $1,284,000 on june 1, and $3,049,820 on december 31. nash company borrowed $1,038,290 on march 1 on a 5-year, 13% note to finance construction of the building. in addition, the company had outstanding all year a 10%, 5-year, $2,241,900 note payable and an 11%, 4-year, $3,500,300 note payable. compute the weighted-average interest rate used for interest capitalization purposes

weighted average interest rate 10.61 %

Explanation:

construction capitalized interest  

mar-01  1,848,000.00 x 10/12  1,540,000.00

jun-01  1,248,000.00 x 7/12     728,000.00

dic-31  30,198,800.00 x 0           -              

capitalization                     2,268,000.00

especific borrowings  

$1,038,290 note at 13% =134977.7

capitalziation through non-specifit borrowings

2,268,000 - 1,038,290 =  1,229,710.00  

average rate  

loan                 rate     interest

2,241,90010%      224,190

3,500,30011%      385,033

5,742,200609,223

average rate: 609,223/5,742,200 = 0.106095747

capitalized from non-specific:

1,229,710 x 10.61% =   130,467.00  

total interest capitalized =

134,977.7 + 130,467 =   265,444.70  

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