Chapter 15 Problem 15-21
Average capitalization rate (900,000 / 8,000,000) 11.25%
Date Expenditure Months Amount
January 1 2,000,000 12 24,000,000
March 31 1,000,000 9 9,000,000
September 30 3,000,000 3 9,000,000
6,000,000 42,000,000
Average expenditures (42,000,000 / 12) 3,500,000
Expenditures on construction 6,000,000
Specific interest cost:
Actual interest 240,000
Interest income ( 10,000) 230,000
General interest cost:
Average expenditures 3,500,000
Less: Specific borrowing 2,000,000
General borrowing 1,500,000
Capitalization rate 11.25% 168,750
Total cost of building 6,398,750
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