NI CALCULATOR, MESSAGEMYINSTRUCTOR FULLSCREEN. PRINTER VERSION BACK Sheffield Fu

Question

NI CALCULATOR, MESSAGEMYINSTRUCTOR FULLSCREEN. PRINTER VERSION BACK Sheffield Furniture Company started construction of a combination office and warehouse building for its own use at an estimated cost of $5,004,000 on January 1, 2017. Sheffield expected to complete the building by December 31, 2017. Sheffield has the following debt obligations outstanding during the construction period. Exercise 10-7 $1,990,900 1,599,600 oassao Construction loan-12% interest, payable semiannually, issued December 31, 2016 Short-term loan-10% interest, payable monthly, and principal payable at maturity on May 30, 2018 Long-term loan-11% interest, payable on January 1 of each year, principal payable on aantan ipta Assume that Sheffield completed the office and warehouse building on December 31, 2017, as planned at a total cost of $5,151,300, and the weighted-average amount of accumulated expenditures was $3,764,600. Compute the avoidable interest on this project. (Use interest rates rounded to 2 decimal places. e purposes and round final ansivers to o decimal places, e.9. 5,275. Avoidable Interest Compute t useful life of 30 years and a salvage value of $297,500. (Round answer to 0 decimal places, e.g. 5.275.) ended December 31, 2018. Sheffield elected to depreciate the building on a straight-line basis and determined that the asset has a Depredation Expense Click if you would like to Show Work for this question: Qpen Show Work

Explanation / Answer

1. Avoidable interest:

We will first compute the weighted average rate.

Thus weighted average rate = 269,465/2,595,100 = 10.3836%

Thus the answer is $423,082

2. Depreciation expense:

Depreciation expense = 5,276,882/30

= $175,896

Weighted Average Rate for non-specific loans Type Amount Rate Interest Short-term loan      1,599,600 10.00%                                 159,960 Long-term loan         995,500 11.00%                                 109,505      Total      2,595,100                                 269,465

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