Solution 1:
Weighted average interest rate on general borrowings = 10%* $2,240,000 /$3,840,000 + 11%* $1,600,000 / $3,840,000
= 10.42%
Avoidable interest = ($3,200,000*12%) + ($5,760,000 - $3,200,000) * 10.42%
= $384,000 + $266,752 = $650,752
Solution 2:
Total cost of building = $8,320,000 + $650,752 = $8,970,752
Depreciation expense for 2020 = (Cost - Salvage value) / Useful life = ($8,970,752 - $480,000)/30 = $283,025
Windsor Furniture Company started construction of a combination office and warehouse building for its own use...
Cheyenne Furniture Company started construction of a combination office and warehouse building for its own use at an estimated cost of $8,000,000 on January 1, 2020. Cheyenne expected to complete the building by December 31, 2020. Cheyenne has the following debt obligations outstanding during the construction period. Construction loan-12% interest, payable semiannually, issued December 31, 2019 $3,200,000 Short-term loan-10% interest, payable monthly, and principal payable at maturity on May 30, 2021 2,240,000 Long-term loan-11% interest, payable on January 1 of...
Windsor Furniture Company started construction of a combination office and warehouse building for its own use at an estimated cost of $10,500,000 on January 1, 2020. Windsor expected to complete the building by December 31, 2020. Windsor has the following debt obligations outstanding during the construction period. Construction loan-12% interest, payable semiannually, issued December 31, 2019 $4,200,000 Short-term loan-10% interest, payable monthly, and principal payable at maturity on May 30, 2021 2,940,000 Long-term loan-11% interest, payable on January 1 of...
Stellar Furniture Company started construction of a combination office and warehouse building for its own use at an estimated cost of $11,000,000 on January 1, 2020. Stellar expected to complete the building by December 31, 2020. Stellar has the following debt obligations outstanding during the construction period. $4,400,000 Construction loan-12% interest, payable semiannually, issued December 31, 2019 3,080,000 Short-term loan-10% interest, payable monthly, and principal payable at maturity on May 30, 2021 Long-term loan-11% interest, payable on January 1 of...
Carla Furniture Company started construction of a combination office and warehouse building for its own use at an estimated cost of $6,000,000 on January 1, 2020. Carla expected to complete the building by December 31, 2020. Carla has the following debt obligations outstanding during the construction period. Construction loan-14% interest, payable semiannually, issued December 31, 2019 $2,400,000 Short-term loan-12% interest, payable monthly, and principal payable at maturity on May 30, 2021 1,680,000 Long-term loan-13% interest, payable on January 1 of...
Sheridan Furniture Company started construction of a combination office and warehouse building for its own use at an estimated cost of $13,500,000 on January 1, 2020. Sheridan expected to complete the building by December 31, 2020. Sheridan has the following debt obligations outstanding during the construction period. Construction loan-12% interest, payable semiannually, issued December 31, 2019 Short-term loan-10% interest, payable monthly, and principal payable at maturity on May 30, 2021 Long-term loan-11% interest, payable on January 1 of each year....
Oriole Furniture Company started construction of a combination office and warehouse building for its own use at an estimated cost of $13,500,000 on January 1, 2020. Oriole expected to complete the building by December 31, 2020. Oriole has the following debt obligations outstanding during the construction period. Construction loan-12% interest, payable semiannually, issued December 31, 2019 $5,400,000 Short-term loan-10% interest, payable monthly, and principal payable at maturity on May 30, 2021 3,780,000 Long-term loan-11% interest, payable on January 1 of...
Sage Furniture Company started construction of a combination office and warehouse building for its own use at an estimated cost of $11,000,000 on January 1, 2020. Sage expected to complete the building by December 31, 2020. Sage has the following debt obligations outstanding during the construction period. Construction loan-12% interest, payable semiannually, issued December 31, 2019 $4,400,000 Short-term loan-10% interest, payable monthly, and principal payable at maturity on May 30, 2021 3,080,000 Long-term loan-11% interest, payable on January 1 of...
Martinez Furniture Company started construction of a combination office and warehouse building for its own use at an estimated cost of $15,000,000 on January 1, 2020. Martinez expected to complete the building by December 31, 2020. Martinez has the following debt obligations outstanding during the construction period. Construction loan-12% interest, payable semiannually, issued December 31, 2019 Short-term loan-10% interest, payable monthly, and principal payable at maturity on May 30, 2021 Long-term loan-11% interest, payable on January 1 of each year....
Pearl Furniture Company started construction of a combination office and warehouse building for its own use at an estimated cost of $7,500,000 on January 1, 2020. Pearl expected to complete the building by December 31, 2020. Pearl has the following debt obligations outstanding during the construction period. Construction loan-12% interest, payable semiannually, issued December 31, 2019 Short-term loan-10% interest, payable monthly, and principal payable at maturity on May 30, 2021 Long-term loan-11% interest, payable on January 1 of each year....
Pearl Furniture Company started construction of a combination office and warehouse building for its own use at an estimated cost of $15,000,000 on January 1, 2020. Pearl expected to complete the building by December 31, 2020. Pearl has the following debt obligations outstanding during the construction period. Construction loan-12% interest, payable semiannually, issued December 31, 2019 $6,000,000 Short-term loan-10% interest, payable monthly, and principal payable at maturity on May 30, 2021 4,200,000 Long-term loan-11% interest, payable on January 1 of...