Silverline Freight Company started construction of a combination office and warehouse building for its own use at an estimated cost of $3,540,000 on January 1, 2017. Silverline expected to complete the building by December 31, 2017. Silverline had the following debt obligations outstanding during the construction period: Construction loan: 7.5% interest, payable monthly, issued January 1, 2017 in the amount of $1,400,000 Short-term loan: 8% interest, payable monthly; principal payable at maturity on May 30, 2019 in the amount of $750,000 Long-term loan: 7% interest, payable on January 1 of each year; principal payable on January 1, 2021 in the amount of $900,000 Required (a) Assume that Silverline completed the office and warehouse building on December 31, 2017 for a total cost of $3,820,000, and the weighted average of accumulated expenditures was $2,190,000. Compute the avoidable interest on this project. (Round interest rates to two decimal places.) Round your final calculation to the nearest whole dollar. (b) Compute the depreciation expense for the year ended December 31, 2018. Silverline elected to depreciate the building on a straight-line basis and estimates that it has a useful life of 30 years with zero salvage value. Round your final calculation to the nearest whole dollar.
Silverline Freight Company started construction of a combination office and warehouse building for its own use at an estimated cost of $3,540,000 on January 1, 2017. Silverline expected to complete the building by December 31, 2017. Silverline had the following debt obligations outstanding during the construction period: Construction loan: 7.5% interest, payable monthly, issued January 1, 2017 in the amount of $1,400,000 Short-term loan: 8% interest, payable monthly; principal payable at maturity on May 30, 2019 in the amount of $750,000 Long-term loan: 7% interest, payable on January 1 of each year; principal payable on January 1, 2021 in the amount of $900,000 Required (a) Assume that Silverline completed the office and warehouse building on December 31, 2017 for a total cost of $3,820,000, and the weighted average of accumulated expenditures was $2,190,000. Compute the avoidable interest on this project. (Round interest rates to two decimal places.) Round your final calculation to the nearest whole dollar. (b) Compute the depreciation expense for the year ended December 31, 2018. Silverline elected to depreciate the building on a straight-line basis and estimates that it has a useful life of 30 years with zero salvage value. Round your final calculation to the nearest whole dollar.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:Silverline Freight Company started construction of a
combination office and warehouse building for its own
use at an estimated cost of $3,540,000 on January 1,
2017. Silverline expected to complete the building by
December 31, 2017. Silverline had the following debt
obligations outstanding during the construction period:
Construction loan: 7.5% interest, payable monthly,
issued January 1, 2017 in the amount of $1,400,000
Short-term loan: 8% interest, payable monthly;
principal payable at maturity on May 30, 2019 in the
amount of $750,000
Long-term loan: 7% interest, payable on January 1 of
each year; principal payable on January 1, 2021 in the
amount of $900,000
Required
(a) Assume that Silverline completed the office and
warehouse building on December 31, 2017 for a total
cost of $3,820,000, and the weighted average of
accumulated expenditures was $2,190,000. Compute
the avoidable interest on this project. (Round interest
rates to two decimal places.) Round your final
calculation to the nearest whole dollar.
(b) Compute the depreciation expense for the year
ended December 31, 2018. Silverline elected to
depreciate the building on a straight-line basis and
estimates that it has a useful life of 30 years with zero
salvage value. Round your final calculation to the
nearest whole dollar.
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