W.

Ave Expenditures
2016
Actual expenditures No of months W Ave. Expenditures
1-Jan 200,000 12/12 200,000
1-Sep 600,000 4/12 200,000
31-Dec 600,000 0/12 0
Total 1,400,000 400,000

CapitalizSpecific borrowing 1,100,000

General borrowings
loan rate interest
3,000,000 10% 300,000
1,000,000 6% 60,000
4,000,000 360,000
Capitalization Rate
(360000/4000000) 9.00%

Step 3 Borrowing Costs

2016

Weighted average expenditures 400,000

Multiply by Specific borrowing % 12%
Avoidable interest expense 48,000

Specific borrowings (1,100,000 x 12%) 132,000

General borrowings 360,000
Total 492,000
Less: Capitalized borrowing cost 48,000
Total Interest expense 444,000

W. Ave Expenditures
2017
Actual expenditures No of months W Ave. Expenditures
1-Jan 1,448,000 9/9 1,448,000
31-Mar 600,000 6/9 400,000
30-Sep 400,000 0/9 0
 Total 2,448,000 1,848,000

1.) Capitalized Borrowing Cost

Specific (1,100,000 x 12% x 9/12) 99,000
General (748,000 x 9% x 9/12) 50,490
149,490

2.) Interest expense

Total Interest on General Borrowing 360,000
Less: Capitalized Gen. Borrowing Cost 50,490
309,510

3.) Carrying value

Cost 2,448,000
Capitalizable Borrowing Cost 149,490
Carrying Value 2,597,490
Ave. expenditures 2017 1,848,000
Less :Specific loan 1,100,000
General loan 748,000