Question

Martinez Company is constructing a building. Construction began on February 1 and was completed on December 31. Expenditures were $1,944,000 on March 1, $1,224,000 on June 1, and $3,046,410 on December 31.Martinez Company borrowed $1,191,160 on March 1 on a 5-year, 13% note to help finance construction of the building. In addition, the company had outstanding all year a 9%, 5-year, $2,480,600 note payable and an 10%, 4-year, $3,847,200 note payable. Compute the weighted-average interest rate used for interest capitalization purposes.

Answer 1

Step-by-step explanation:

9%, 5-year note 2,480,600 223,254 [2,480,000*0.09]

10%, 4-year note 3,847,200 384,720

If we sum the 2,480,600+3,847,200 = 6,327,800

3,847,200+384,720=607974

So, Weighted-average interest rate = 607,974/6,327,800= 9.61%