How was the interest capitalized for the construction project calculated in 2024?
Calculation of Interest Capitalized for 2024
The interest capitalized for 2024 was approximately $299,294. To calculate this amount, the specific interest method was used. This method involves determining the weighted-average accumulated expenditures during the construction period. Here's how the calculation was done step by step:
1. Determine the Time Periods for Each Expenditure:
- January 1, 2024: 12 months
- September 1, 2024: 4 months
- December 31, 2024: 3 months
- March 31, 2025: 6 months
- September 30, 2025: 9 months
2. Calculate the Total Number of Months in the Construction Period:
12 months + 4 months + 3 months + 6 months + 9 months = 34 months
3. Calculate the Weighted-Average Accumulated Expenditures:
- (270,000 * 12) + (384,000 * 4) + (384,000 * 3) + (384,000 * 6) + (270,000 * 9) = 10,620,000
4. Calculate the Interest Capitalized for 2024:
Interest Capitalized = Weighted-average accumulated expenditures * Interest rate * Time period
Interest Capitalized = 10,620,000 * 0.08 * (12/34)
Interest Capitalized = $299,294.12 (rounded to the nearest dollar)
Therefore, the interest capitalized for the construction project in 2024 was approximately $299,294.