Question

Question 1 0/1 View Policies Show Attempt History Current Attempt in Progress Sandhill Furniture Company started construction of a combination office and warehouse building for its own use at an estimated cost of $4,000,000 on January 1, 2020. Sandhill expected to complete the building by December 31, 2020. Sandhill has the following debt obligations outstanding during the construction period. Construction loan-10 % interest, payable semiannually, issued December 31, 2019 $1,600,000 Short-term loan-8% interest, payable monthly, and principal payable at maturity on May 30, 2021 1,120,000 Long-term loan-9% interest, payable on January 1 of each year. Principal payable on January 1, 2024 800,000 X Your answer is incorrect. Assume that Sandhill completed the office and warehouse building on December 31, 2020, as planned at a total cost of $4,160,000, and the weighted-average amount of accumulated expenditures was $2,880,000. Compute the avoidable interest on this project. (Use interest rates rounded to 2 decimal places, e.g. 7.58% for computational purposes and round final answers to 0 decimal places, e.g. 5,275.) Avoidable Interest $ eTextbook and Media x Your answer is incorrect. Compute the depreciation expense for the year ended December 31,2021. Sandhill elected to depreciate the building on a straight-line basis and determined that the asset has a useful life of 30 years and a salvage value of $240,000. (Round answer to 0 decimal places, e.g. 5,275.) Depreciation Expense $

Answer 1

1)

Average Interest rate
	Amount	Rate of Interest	Interest
8% Short Term Loan	1,120,000.00	8%	89,600.00
9% Long Term Loan	800,000.00	9%	72,000.00
Total	1,920,000.00		161,600.00

Average Interest rate = 161,600/1,920,000 = 8.42%

Avoidable Interest
Construction Loan	1,600,000.00	10%	160,000.00
Balance Amount	1,280,000.00	8.42%	107,776.00
Avoidable Interest			267,776.00

2)Depreciation Expense = (4,160,000 + 267,776 - 240,000)/30

=139,593