Question

CALCULATOR PRINTER VERSION NR Question 32 Coronado Furniture Company started construction of a combination office and warehouse building for its own use at an estimated cost of $7,000,000 on January 1, 2020. Coronado expected to complete the building by December 31, 2020. Coronado has the following debt obligations outstanding during the construction period Construction loan-12% Interest, payable semiannually, issued December 31, 2019 $2,800,000 Short-term loan-10% Interest, payable monthly, and principal payable at maturity on May 30, 2021 1.960,000 Long-term loan-11% Interest, payable on January 1 of each year. Principal payable on January 1, 2024 1,400,000 Assume that Coronado completed the office and warehouse building on December 31, 2020, as planned at a total cost of 57.280,000, and the weighted average amount of accumulated expenditures was $5,040,000. Compute the avoidable interest on this project. (Use interest rates rounded to 7 decimal places... 7.58 for computational purposes and round final answers to decimal places, e.o. 5.275.) Avoldable Interest Compute the depreciation expense for the year ended December 31, 2021. Coronado elected to depreciate the building on a straight-line basis and determined that the last We of 30 years and a salvage value of $420,000. (Round answer to decimal places ... 5.275.) Depredation Expense Click if you would like to Show Work for this question: Doe Show Work Question Attempts: of 1 used SAVE FOR ere to search o - c E R Р P D. Н.

Answer 1

Part A)
	Avoidable interest: $ 569408
	Weighted- average	* Interest rate   =	Avoidable interest
	accumulated expenditures
	2800000	12%	336000
	2240000	10.42%	233408
	(5040000-2800000)
	5040000		569408
	Weighted average interest	Principal	Interest
	rate computation
	10% short term loan	1960000	196000	(1960000*10%)
	11%long term loan	1400000	154000	(1400000*11%)
	Total	3360000	350000

Weighted average interest rate = Total Interest/Total principal
,=350000/3360000
,= 10.42%

Part B)
	Dereciation Expense =$ 247647
	Total Cost = Cost + interest capitalized
	,= 7280000 + 569408
	,= 7849408
	Depreciation expense=
	(7849408 - 420000) / 30
	,= $ 247647