CraneFurniture Company started construction of a combination office and warehouse building for its own use at an estimated cost of $14,000,000 on January 1, 2020. Crane expected to complete the building by December 31, 2020. Crane has the following debt obligations outstanding during the construction period.Construction loan-12% interest, payable semiannually, issued December 31, 2019 $5,600,000Short-term loan-10% interest, payable monthly, and principal payable at maturity on May 30, 2021 4,200,000Long-term loan-11% interest, payable on January 1 of each year. Principal payable on January 1, 2024 2,800,000 Assume that Crane completed the office and warehouse building on December 31, 2020, as planned at a total cost of $14,560,000, and the weighted-average amount of accumulated expenditures was $10,080,000. Compute the avoidable interest on this project.

The avoidable interest is the interest amount which has been incurred over the company on the loan…

Answered: Compute the avoidable interest on this…

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

Chapter17: Advanced Issues In Revenue Recognition

Section: Chapter Questions

Problem 6P

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CraneFurniture Company started construction of a combination office and warehouse building for its own use at an estimated cost of $14,000,000 on January 1, 2020. Crane expected to complete the building by December 31, 2020. Crane has the following debt obligations outstanding during the construction period.

Construction loan-12% interest, payable semiannually, issued December 31, 2019		$5,600,000
Short-term loan-10% interest, payable monthly, and principal payable at maturity on May 30, 2021		4,200,000
Long-term loan-11% interest, payable on January 1 of each year. Principal payable on January 1, 2024		2,800,000

Assume that Crane completed the office and warehouse building on December 31, 2020, as planned at a total cost of $14,560,000, and the weighted-average amount of accumulated expenditures was $10,080,000. Compute the avoidable interest on this project.

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