LINK TO TEXT Pina Furniture Company started construction of a combination office
ID: 2571093 • Letter: L
Question
LINK TO TEXT
Pina Furniture Company started construction of a combination office and warehouse building for its own use at an estimated cost of $5,039,600 on January 1, 2017. Pina expected to complete the building by December 31, 2017. Pina has the following debt obligations outstanding during the construction period.Construction loan-10% interest, payable semiannually, issued December 31, 2016 $2,000,000 Short-term loan-8% interest, payable monthly, and principal payable at maturity on May 30, 2018 1,596,300 Long-term loan-9% interest, payable on January 1 of each year. Principal payable on January 1, 2021 997,800
Explanation / Answer
Calculation of avoidable interest Amt Int % Int amt Specific loan 2000000 10% 200000 Non specific loan (3802200-2000000) 1802200 8.38% 151024 3802200 351024 weighted avg rate of non specific loans Amt Int % Int amt Short term loan 1596300 8% 127704 Long term loan 997800 9% 89802 2594100 217506 Weighted avg rate 217506/2594100 8.38 ans 1 Avoidable interest 351024 ans 2 Cost (5235700+351024) 5586724 Less: Salvage value 297000 Depreciable value S 5289724 No. of years N 30 Depreciation for 2018 S/N 176324 ans
Related Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.