Question 1 Swifty Furniture Company started construction of a combination office

Question

Question 1 Swifty Furniture Company started construction of a combination office and warehouse building for its own use at an estimated cost of $4,975,900 on January 1, 2017. Swifty expected to complete the building by December 31, 2017. Swifty has the following debt obligations outstanding during the construction period. Construction loan-10% interest, payable semiannually, issued December 31, 2016 Short-term loan-8% interest, payable monthly, and principal payable at maturity on May 30, 2018 Long-term loan-9% interest, payable on January 1 of each year. Principal payable on January 1, 2021 $1,988,800 1,609,500 996,100 (a) ] Your answer is incorrect. Try again. Assume that Swifty completed the office and warehouse building on December 31, 2017, as planned at a total cost of $5,235,200, and the weighted-average amount of accumulated expenditures was $3,818,100. 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.) Avoidable Interest 417116 Attempts: 2 of s sedSAVE FOR LATER SUBMIT ANSWER SUBMIT ANSWER The parts of this question must be completed in order. This part will be available when you complete the part above.

Explanation / Answer

Weighted Average Rate for non-specific loans: Amount Interest rate Interest Short-term loan 1609500 8% 128760 Long-term loan 996100 9% 89649 Total 2605600 218409 Weighted Average Rate for non-specific loans = 218409/2605600= 8.38% Weighted Average expenditure Interest rate Interest Interest on loan specifically for construction 1988800 10% 198880 Interest on remaining loan 1829300 10.38% 189881 Avoidable interest 388761

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