Problem 25-15
Expenditure Fraction Average
January 1, 2023 4,000,000 12/12 4,000,000
April 1 5,000,000 9/12 3,750,000
December 31 3,000,000 - 250,000
12,000,000 8,000,000
1.
Average expenditure 8,000,000
Less: Applicable to specific borrowing 3,000,000
Applicable to general borrowing 5,000,000
Specific borrowing (3,000,000 x 10%) 300,000
General borrowing (5,000,000 x 12%) 600,000
Capitalizable borrowing cost 900,000
Expenditure 12,000,000
Add: Capitalized borrowing cost 900,000
Total cost 12,900,000
2.
Expenditure Fraction Average
January 1, 2024 12,900,000 6/6 12,900,000
March 1, 2024 6,000,000 4/6 4,000,000
18,900,000 16,900,000
Average expenditure 16,900,000
Less: Applicable to specific borrowing 3,000,000
Applicable to general borrowing 13,900,000
Specific borrowing (3,000,000 x 10% x 6/12) 150,000
General borrowing (13,900,000 x 12% 6/12) 834,000
Capitalizable borrowing cost 984,000
Cumulative Expenditure 18,900,000
Add: Capitalized borrowing cost 984,000
Total cost 19,884,000
3.
Interest on specific loan 300,000
Interest on general loan (25,000,000 x 12%) 3,000,000
Actual interest incurred 3,300,000
Less: Capitalizable borrowing cost 900,000
Interest expense - 2023 2,400,000
4.
Interest on specific loan 300,000
Interest on general loan (25,000,000 x 12%) 3,000,000
Actual interest incurred 3,300,000
Less: Capitalizable borrowing cost 984,000
Interest expense - 2024 2,316,000
Problem 25-16
Expenditure Fraction Average
January 1, 2023 2,000,000 12/12 2,000,000
July 1, 2023 4,000,000 6/12 2,000,000
November 1 3,000,000 2/12 500,000
9,000,000 4,500,000
1.
Average expenditure 4,500,000
Less: Applicable to specific borrowing 2,000,000
Applicable to general borrowing 2,500,000
Specific borrowing (2,000,000 x 10%) 200,000
General borrowing (2,500,000 x 12%) 300,000
Capitalizable borrowing cost 500,000
Expenditure 9,000,000
Add: Capitalized borrowing cost 500,000
Total cost 9,500,000
2.
Expenditure Fraction Average
January 1, 2024 9,500,000 12/12 9,500,000
July 1, 2024 1,000,000 6/12 500,000
10,500,000 10,000,000
Average expenditure 10,000,000
Less: Applicable to specific borrowing 2,000,000
Applicable to general borrowing 8,000,000
Specific borrowing (2,000,000 x 10%) 200,000
General borrowing (8,000,000 x 12%) 960,000
Capitalizable borrowing cost 1,160,000
Cumulative Expenditure 10,500,000
Add: Capitalized borrowing cost 1,160,000
Total cost 11,660,000
3.
Interest on specific loan 200,000
Interest on general loan (25,000,000 x 12%) 3,000,000
Actual interest incurred 3,200,000
Less: Capitalizable borrowing cost 500,000
Interest expense - 2023 2,700,000
4.
Interest on specific loan 200,000
Interest on general loan (25,000,000 x 12%) 3,000,000
Actual interest incurred 3,200,000
Less: Capitalizable borrowing cost 1,160,000
Interest expense - 2024 2,040,000
Problem 25-17
Expenditure Fraction Average
July 1, 2023 5,000,000 6/6 5,000,000
October 1 4,000,000 3/6 2,000,000
9,000,000 7,000,000
1.
Average expenditure 7,000,000
Less: Applicable to specific borrowing 7,000,000
Applicable to general borrowing 0
Capitalizable borrowing cost (7,000,000 x 6% x 6/12) 210,000
Expenditure 9,000,000
Add: Capitalized borrowing cost 210,000
Total cost 9,210,000
2.
Expenditure Fraction Average
Jan. 1, 2024 9,210,000 10/10 9,210,000
Feb. 1 3,000,000 9/10 2,700,000
April 1 2,000,000 7/10 1,400,000
Sept. 1 2,000,000 2/10 400,000
Oct. 1 500,000 1/10 50,000
16,710,000 13,760,000
Average expenditure 13,760,000
Less: Applicable to specific borrowing 7,000,000
Applicable to general borrowing 6,760,000
Specific borrowing (7,000,000 x 6% x 10/12) 350,000
General borrowing (6,760,000 x 9% x 10/12) 507,000
Capitalizable borrowing cost 857,000
3.
Interest on specific loan (7,000,000 x 6%) 420,000
Interest on general loan (15,000,000 x 9%) 1,350,000
Actual interest incurred 1,770,000
Less: Capitalizable borrowing cost 857,000
Interest expense - 2024 913,000
4.
Cumulative expenditure 16,710,000
Add: Capitalized borrowing cost 857,000
Total cost 17,567,000
Problem 25-18
1.
Expenditure Fraction Average
Jan. 1, 2023 2,000,000 12/12 2,000,000
March 31 4,000,000 9/12 3,000,000
June 30 6,100,000 6/12 3,050,000
September 30 4,400,000 3/12 1,100,000
December 31 3,500,000 -
20,000,000 9,150,000
Principal Borrowing cost
10% 10 year note 6,000,000 600,000
12% 5 year note 7,000,000 840,000
13,000,000 1,440,000
2.
Capitalization rate (1,440,000/13,000,000) 11.08%
Average expenditure 9,150,000
Less: Applicable to specific borrowing 8,500,000
Applicable to general borrowing 650,000
Specific borrowing 8,500,000
Multiply by future value factor 1.1255
Principal and interest due on 2023 9,566,750
Less: Specific borrowing 8,500,000
Interest on specific borrowing 1,066,750
General borrowing (650,000 x 11,08%) 72,020
Capitalizable borrowing cost 1,138,770
3.
Expenditure 20,000,000
Add: Capitalized borrowing cost 1,138,770
Total cost 21,138,770
4.
Interest on specific loan 1,066,750
Interest on general loan (13,000,000 x 11.08%) 1,440,400
Actual interest incurred 2,507,150
Less: Capitalizable borrowing cost 1,138,770
Interest expense - 2024 1,368,380