Question

Early in 2013, Beech Aircraft acquired 9 acres of land and engaged Wal-Mart to design and construct a manufacturing facility. Construction was started on May 1, 2013 and was completed on December 31, 2013. Beech Aircraft made the following payments to Wal-Mart during 2013:

May 1, 2013	$385,000
July 31, 2013	$1,065,000
December 31, 2013	$680,000

In order to help finance the construction, Beech Aircraft issued the following during 2013: $515,000 of 10-year, 14% bonds payable, issued at par on April 30, 2013, with interest payable annually on April 30. 90,500 shares of no-par common stock, issued at $9 per share, on October 1, 2013. In addition to the 14% bonds payable, the only other debt outstanding during 2013 was a $390,000, 8% note payable dated January 1, 2008 and due January 1, 2015, with interest payable annually on January 1. Based on the foregoing, what is the avoidable interest incurred during 2013 on this project?

Answer 1