
FINANCIAL ACCOUNTING
10th Edition
ISBN: 9781259964947
Author: Libby
Publisher: MCG
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Sheridan Furniture Company started construction of a combination office and warehouse building for its own use at an estimated cost
of $6,000,000 on January 1, 2025. Sheridan expected to complete the building by December 31, 2025. Sheridan has the following
debt obligations outstanding during the construction period.
Construction loan-12% interest, payable semiannually, issued December 31, 2024
Short-term loan-10% interest, payable monthly, and principal payable at maturity on May 30, 2026
Long-term loan-11% interest, payable on January 1 of each year; principal payable on January 1, 2029
(a)
Avoidable interest
Assume that Sheridan completed the office and warehouse building on December 31, 2025, as planned, at a total cost of
$6,240,000, and the weighted-average amount of accumulated expenditures was $4,320,000. 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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$2,400,000
1,800,000
S
1,200,000
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