Question

Exercise 10-07 Tamarisk Furniture Company started construction of a combination office and warehouse building for its own use at an estimated cost of $9,000,000 on January 1, 2020. Tamarisk expected to complete the building by December 31, 2020. Tamarisk 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. Principal payable on January 1, 2024 $3,600,000 2,520,000 1,800,000 x Your answer is incorrect. Try again. Assume that Tamarisk completed the office and warehouse building on December 31, 2020, as planned at a total cost of $9,360,000, and the weighted average amount of accumulated expenditures was $6,480,000. 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 30432000 LINK TO TEXT x Your answer is incorrect. Try again. Compute the depreciation expense for the year ended December 31, 2021. Tamarisk 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 $540,000. (Round answer to 0 decimal places, e.g. 5,275.) Depreciation Expense 432000

Answer 1

Hi

Let me know in case you face any issue:

Answer is highlighted in Yellow: Solution: Amount 3600000 Rate 12% Avoidable Interest 432000 a) Interest on loan specifically for construction 10.42% 2880000 6480000 300096 732096 Avoidable interest Interest on Balance amount at average rate 2520000 10% 252000 1800000 11% 198000 4320000 10.42% 450000 b) Step.01: Expense incurred without interest Interest Capitalization Total cost capitalized for this building including interest 9360000 732096 10092096 Step.02: Depreciation Expense = (Cost - Salvage value) / Life b) Depreciation Expense = (10092096-540000)/30 = 318403