Question

Teal Furniture Company started construction of a combination office and warehouse building for its own use at an estimated cost of $5,000,200 on January 1, 2017. Teal expected to complete the building by December 31, 2017. Teal has the following debt obligations outstanding during the construction period.

Exercise 10-7 (Part Level Submission) Teal Furniture Company started construction of a combination office and warehouse building for its own use at an estimated cost of $5,000,200 on January 1 December 31, 2017. Teal has the following debt obligations outstanding during the construction period , 2017. Teal expected to complete the building by Construction loan-12% interest, payable semiannually, issued December 31, 2016 Short-term loan-10% interest, payable monthly, and principal payable at maturity on May 30, 2018 Long-term loan-11% interest, payable on January 1 of each year. Principal payable on January 1, 2021 $2,007,800 1,588,200 990,600 Assume that Teal completed the office and warehouse building on December 31, 2017, as planned at a total cost of $5,167,500, and the weighted-average amount of accumulated expenditures was $3,836,900. 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 decimal places, e.g. 5,7) Avoidable Interest

Please make the answer clear to see and bold. Thank you so much for all your help.

Answer 1

Hi

Let me know in case you face any issue:

Interest is capitalized for the construction period of capital assets: