BlossomFurniture Company started construction of a combination office and warehouse building for its own use at an estimated cost of $7,000,000 on January 1, 2020. Blossom expected to complete the building by December 31, 2020. Blossom has the following debt obligations outstanding during the construction period.Construction loan-12% interest, payable semiannually, issued December 31, 2019 $2,800,000Short-term loan-10% interest, payable monthly, and principal payable at maturity on May 30, 2021 1,960,000Long-term loan-11% interest, payable on January 1 of each year. Principal payable on January 1, 2024 1,400,000Assume that Blossom completed the office and warehouse building on December 31, 2020, as planned at a total cost of $7,280,000, and the weighted-average amount of accumulated expenditures was $5,040,000. 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.)

Given: Estimated cost = $7,000,000 Total cost = $7,280,000 Accumulated expenditures = $5,040,000

Answered: BlossomFurniture Company started…

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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BlossomFurniture Company started construction of a combination office and warehouse building for its own use at an estimated cost of $7,000,000 on January 1, 2020. Blossom expected to complete the building by December 31, 2020. Blossom has the following debt obligations outstanding during the construction period.

Construction loan-12% interest, payable semiannually, issued December 31, 2019		$2,800,000
Short-term loan-10% interest, payable monthly, and principal payable at maturity on May 30, 2021		1,960,000
Long-term loan-11% interest, payable on January 1 of each year. Principal payable on January 1, 2024		1,400,000

Assume that Blossom completed the office and warehouse building on December 31, 2020, as planned at a total cost of $7,280,000, and the weighted-average amount of accumulated expenditures was $5,040,000. 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.)

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