Larkspur Industries Inc. started construction of a manufacturing facility for its own use at an estimated cost of $ 12,200,000 on January 1, 2017. Larkspur expected to complete the building by December 31, 2017. Larkspur's debt, all of which was outstanding during the construction period, was as follows. Construction loan- 11% interest, payable semiannually, issued December 31, 2016; $ 6,100,000 Long-term loan #1 – 10% interest, payable on January 1 of each year. Principal payable on January 1, 2019; $ 1,830,000 Long-term loan #2– 12% interest, payable on December 31 of each year. Principal payable on December 31, 2025; $ 4,270,000 (a) Assume that Larkspur completed the facility on December 31, 2017, at a total cost of $ 12,566,000, and the weighted-average amount of accumulated expenditures was $ 8,296,000. Compute the avoidable interest on this project. (Use interest rates rounded to 2 decimal places, e.g. 7.58% and round final answer to 0 decimal places, e.g. 5,275.) Avoidable Interest

Larkspur Industries Inc. started construction of a manufacturing facility for its own use at an estimated cost of $ 12,200,000 on January 1, 2017. Larkspur expected to complete the building by December 31, 2017. Larkspur's debt, all of which was outstanding during the construction period, was as follows. Construction loan- 11% interest, payable semiannually, issued December 31, 2016; $ 6,100,000 Long-term loan #1 – 10% interest, payable on January 1 of each year. Principal payable on January 1, 2019; $ 1,830,000 Long-term loan #2– 12% interest, payable on December 31 of each year. Principal payable on December 31, 2025; $ 4,270,000 (a) Assume that Larkspur completed the facility on December 31, 2017, at a total cost of $ 12,566,000, and the weighted-average amount of accumulated expenditures was $ 8,296,000. Compute the avoidable interest on this project. (Use interest rates rounded to 2 decimal places, e.g. 7.58% and round final answer to 0 decimal places, e.g. 5,275.) Avoidable Interest

Financial Accounting Intro Concepts Meth/Uses

14th Edition

ISBN:9781285595047

Author:Weil

Publisher:Weil

Chapter10: Long-lived Tangible And Intangible Assets

Section: Chapter Questions

Problem 18E

See similar textbooks

Similar questions

Tamarisk Industries Inc. started construction of a manufacturing facility for its own use at an estimated cost of $9,000,000 on January 1, 2017. Tamarisk expected to complete the building by December 31, 2017. Tamarisk’s debt, all of which was outstanding during the construction period, was as follows. ● Construction loan—11% interest, payable semiannually, issued December 31, 2016; $4,500,000 ● Long-term loan #1 – 10% interest, payable on January 1 of each year. Principal payable on January 1, 2019; $1,350,000 ● Long-term loan #2—12% interest, payable on December 31 of each year. Principal payable on December 31, 2025; $3,150,000 Avoidable interest is 679,680. Compute the depreciation expense for the year ended December 31, 2018. Tamarisk estimated the facility’s useful life to be 25 years with a salvage value of $900,000. Tamarisk elected to depreciate the facility on a straight-line basis.
Tamarisk Industries Inc. started construction of a manufacturing facility for its own use at an estimated cost of $9,000,000 on January 1, 2017. Tamarisk expected to complete the building by December 31, 2017. Tamarisk’s debt, all of which was outstanding during the construction period, was as follows. ● Construction loan—11% interest, payable semiannually, issued December 31, 2016; $4,500,000 ● Long-term loan #1 – 10% interest, payable on January 1 of each year. Principal payable on January 1, 2019; $1,350,000 ● Long-term loan #2—12% interest, payable on December 31 of each year. Principal payable on December 31, 2025; $3,150,000 Assume that Tamarisk completed the facility on December 31, 2017, at a total cost of $9,270,000, and the weighted-average amount of accumulated expenditures was $6,120,000.Compute the avoidable interest on this project
Skysong Industries Inc. started construction of a manufacturing facility for its own use at an estimated cost of $8,600,000 on January 1, 2017. Skysong expected to complete the building by December 31, 2017. Skysong’s debt, all of which was outstanding during the construction period, was as follows. ● Construction loan—11% interest, payable semiannually, issued December 31, 2016; $4,300,000 ● Long-term loan #1 – 10% interest, payable on January 1 of each year. Principal payable on January 1, 2019; $1,290,000 ● Long-term loan #2—12% interest, payable on December 31 of each year. Principal payable on December 31, 2025; $3,010,000 Assume that Skysong completed the facility on December 31, 2017, at a total cost of $8,858,000, and the weighted-average amount of accumulated expenditures was $5,848,000.A. Compute the avoidable interest on this project. (Use interest rates rounded to 2 decimal places, e.g. 7.58% and round final answer to 0 decimal places,…
Skysong Industries Inc. started construction of a manufacturing facility for its own use at an estimated cost of $11,000,000 on January 1, 2017. Skysong expected to complete the building by December 31, 2017. Skysong’s debt, all of which was outstanding during the construction period, was as follows. ● Construction loan—11% interest, payable semiannually, issued December 31, 2016; $5,500,000 ● Long-term loan #1 – 10% interest, payable on January 1 of each year. Principal payable on January 1, 2019; $1,650,000 ● Long-term loan #2—12% interest, payable on December 31 of each year. Principal payable on December 31, 2025; $3,850,000 (a) Assume that Skysong completed the facility on December 31, 2017, at a total cost of $11,330,000, and the weighted-average amount of accumulated expenditures was $7,480,000.Compute the avoidable interest on this project. (Use interest rates rounded to 2 decimal places, e.g. 7.58% and round final answer to 0 decimal…
Teal Mountain Industries Inc. started construction of a manufacturing facility for its own use at an estimated cost of $9,200,000 on January 1, 2017. Teal Mountain expected to complete the building by December 31, 2017. Teal Mountain’s debt, all of which was outstanding during the construction period, was as follows. ● Construction loan—11% interest, payable semiannually, issued December 31, 2016; $4,600,000 ● Long-term loan #1 – 10% interest, payable on January 1 of each year. Principal payable on January 1, 2019; $1,380,000 ● Long-term loan #2—12% interest, payable on December 31 of each year. Principal payable on December 31, 2025; $3,220,000 Assume that Teal Mountain completed the facility on December 31, 2017, at a total cost of $9,476,000, and the weighted-average amount of accumulated expenditures was $6,256,000.Compute the avoidable interest on this project. (Use interest rates rounded to 2 decimal places, e.g. 7.58% and round final answer to 0 decimal…
On January 1, 2016, Randolf Company signed a contract to have Rory Associates construct a manufacturing facility at a cost of $14,000,000. It was estimated that it would take three years to complete the project. Also on January 1, 2016, to finance the construction cost, Randolf borrowed $14,000,000 payable in seven annual installments of $2,000,000 plus interest at the rate of 9%. During 2016, Randolf made progress payments totaling $5,000,000 under the contract, and the average amount of accumulated expenditures was $3,000,000 for the year. The excess borrowed funds were invested in short-term securities, from which Randolf realized investment income of $330,000. What amount should Randolf report as capitalized interest at December 31, 2016? $510,000 $0 $1,260,000 $270,000
During 2017, Reticulated Company constructed a new manufacturing facility at a cost of P30,000,000. The expenditures for this building, which was finished late in 2017, were incurred evenly during the year. The entity had the following loans outstanding at December 31, 2017.  10% note to finance specifically construction of the manufacturing facility, dated January 1, 2017, P10,000,000. Unpaid as of December 31, 2017. Investments were made on the proceeds from this loan and income of P100,000 was realized in 2017.  12%, 20-years bonds payable issued at face value on April 30, 2016, P30,000,000.  8%, 5-years payable, dated March 1, 2016, P10,000,000. What amount of interest is capitalized as cost of the new building? A. 1,550,000 B. 1,450,000 C. 1,400,000 D. 1,500,000
IvanhoeFurniture Company started construction of a combination office and warehouse building for its own use at an estimated cost of $10,500,000 on January 1, 2020. Ivanhoe expected to complete the building by December 31, 2020. Ivanhoe has the following debt obligations outstanding during the construction period. Construction loan-12% interest, payable semiannually, issued December 31, 2019 $4,200,000 Short-term loan-10% interest, payable monthly, and principal payable at maturity on May 30, 2021 3,150,000 Long-term loan-11% interest, payable on January 1 of each year. Principal payable on January 1, 2024 2,100,000 Assume that Ivanhoe completed the office and warehouse building on December 31, 2020, as planned at a total cost of $10,920,000, and the weighted-average amount of accumulated expenditures was $7,560,000. Compute the avoidable interest on this project. (Use interest rates rounded to 2 decimal places, e.g. 7.58% for computational purposes and…
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 $4,000,000 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 (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…
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 $4,000,000 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 (a) Correct answer icon Your answer is correct. 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…
Vaughn Furniture 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. Vaughn expected to complete the building by December 31, 2020. Vaughn has the following debt obligations outstanding during the construction period. Construction loan-10% interest, payable semiannually, issued December 31, 2019 $4,000,000 Short-term loan-8% interest, payable monthly, and principal payable at maturity on May 30, 2021 2,800,000 Long-term loan-9% interest, payable on January 1 of each year. Principal payable on January 1, 2024 2,000,000 Assume that Vaughn 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…
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.