Question 1 Shamrock Industries Inc. started construction of a manufacturing faci
ID: 2521705 • Letter: Q
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Question 1 Shamrock Industries Inc. started construction of a manufacturing facility for its own use at an estimated cost of $8,400,000 on January 1, 2017. Shamrock expected to complete the building by December 31, 2017. Shamrock's debt, all of which was outstanding during the construction period, was as follows. . Construction loan-11.00% interest, payable semiannually, issued December 31, 2016. S,200,000) · Long-term loan #1-10.00% interest, payable on January 1 of each year. Principal payable on January 1, 2019, s.260 ,000 . Long-term loan #2-12.00% interest, payable on December 31 of each year. Principal payable on December 31, 2025: $2940,000 Assume that Shamrock completed the facility on December 31, 2017, at a total cost of $8,652,000, and the weighted-average amount of accumulated expenditures was $5,712,000. Compute the avoidable interest on this project. (Use interest rates rounded to 2 decimal places, eg, 7.58% and round final answer to 0 decimal places, eg. 5,275.) Avoidable Interest s Compute the depreciation expense for the year ended December 31, 2018. Shamrock estimated the facility's useful life to be 25 years with a salvage value of $840,000 Shamrock elected to depreciate the facility on a straight-line basis. Depreciation Expense ,Explanation / Answer
weighted-average accumulated expenditures 5,712,000.00 Construction Loan 4,200,000.00 Long Term Loan-10% 1,260,000.00 Long Term Loan-12% 2,940,000.00 Weighted-average interest rate= (1260000*10%+2940000*12%)/(1260000+2940000)= 11.40% Avoidable Interest= 4200000*11%+(5712000-4200000)*11.4% 634,368.00 Manufactring Cost 8,652,000.00 Borrowing Cost Captilized 634,368.00 9,286,368.00 Life of Assets 25 Years Salvage Value 840,000.00 Depreciation (9286368-840000)/25 = 337854.72
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