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ID: 2483303 • Letter: H
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home / study / business / accounting / questions and answers / harrisburg furniture company started construction ... Your question has been answered! Rate it below. Let us know if you got a helpful answer. . Question Harrisburg Furniture Company started construction of a combination office and warehouse building for its own use at an estimated cost of $5,015,800 on January 1, 2014. Harrisburg expected to complete the building by December 31, 2014. Harrisburg has the following debt obligations outstanding during the construction period. Construction loan—12% interest, payable semiannually, issued December 31, 2013 $2,010,800 Short-term loan—10% interest, payable monthly, and principal payable at maturity on May 30, 2015 1,621,200 Long-term loan—11% interest, payable on January 1 of each year; principal payable on January 1, 2018 1,029,900 Assume that Harrisburg completed the office and warehouse building on December 31, 2014, as planned at a total cost of $5,211,600, and the weighted average amount of accumulated expenditures was $3,814,400. 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.) Compute the depreciation expense for the year ended December 31, 2015. Harrisburg 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 $304,700
Explanation / Answer
Answer:
Answer:
Bec avoidable interest is lower than actual interest so use avodable interest.
Cost+Avoidable interest=$5,211,600+428690.04=5640290.04
Dep expense=5640290.04-304700/30 years=$177853
Weighted-Average Interest Rate Principal Interest 10% short term loan 1621200 162120 11% long term loan 1029900 113289 Total 2651100 275409 Total interest/Total principal 10.39% Weighted Average (Accu. Exp) Interest rate Avoidable interest 2010800 12% 241296 1803600 10.39% 187394.04 3814400 428690.04Related Questions
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