SandhillFurniture Company started construction of a combination office and warehouse building for its own use at an estimated cost of $10,000,000 on January 1, 2020. Sandhill expected to complete the building by December 31, 2020. Sandhill has the following debt obligations outstanding during the construction period.Construction loan-12% interest, payable semiannually, issued December 31, 2019 $4,000,000Short-term loan-10% interest, payable monthly, and principal payable at maturity on May 30, 2021 3,000,000Long-term loan-11% interest, payable on January 1 of each year. Principal payable on January 1, 2024 2,000,000(a) Assume that Sandhill completed the office and warehouse building on December 31, 2020, as planned at a total cost of $10,400,000, and the weighted-average amount of accumulated expenditures was $7,200,000. 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 $

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Answered: Assume that Sandhill completed the…

Intermediate Accounting: Reporting And Analysis

3rd Edition

ISBN:9781337788281

Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Chapter14: Financing Liabilities: Bonds And Long-term Notes Payable

Section: Chapter Questions

Problem 13C

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(a)

Assume that Sandhill completed the office and warehouse building on December 31, 2020, as planned at a total cost of $10,400,000, and the weighted-average amount of accumulated expenditures was $7,200,000. 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

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Construction loan-12% interest, payable semiannually, issued December 31, 2019		$4,000,000
Short-term loan-10% interest, payable monthly, and principal payable at maturity on May 30, 2021		3,000,000
Long-term loan-11% interest, payable on January 1 of each year. Principal payable on January 1, 2024		2,000,000