F3 Interest capitalization

Question 1

Step 1

Answer 1

Capitalize only on a weighted average of accumulated expenditures
Capitalize no matter if the asset is for personal use or for sale.

Question 2

Step 2

Answer 2

Calculate weighted average expenditures the same as you would with weighted average shares outstanding

100 * 3/12
200 * 5/12

Question 3

Step 3

Answer 3

Multiply the weighted average by the corresponding interest

Question 4

Step 4

Answer 4

If the weighted average is more than what was borrowed we used the weighted average of the interest for the outstanding loans.

Question 5

Step 5

Answer 5

The capitalized interest is lower of the actual interest cost incurred and the capitalized interest AKA avoidable interest.