Sunland Furniture Company started construction of a combination office and wareh

Question

Sunland Furniture Company started construction of a combination office and warehouse building for its own use at an estimated cost of $4,981,900 on January 1, 2017. Sunland expected to complete the building by December 31, 2017. Sunland has the following debt obligations outstanding during the construction period. Construction loan-10% interest, payable semiannually, issued December 31, 2016 Short-term loan-8% interest, payable monthly, and principal payable at maturity on May 30, 2018 Long-term loan-9% interest, payable on January 1 of each year. Principal payable on January 1, 2021 1,002,900 $2,000,100 1,595,800 Your answer is incorrect. Try again. Assume that Sunland completed the office and warehouse building on December 31, 2017, as planned at a total cost of $5,251,100, and the weighted-average amount of accumulated expenditures was S3 ,799,100. 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 O decimal places, e.g. 5,275.) Avoidable Interest 417001 LINK TO TEXT Your answer is incorrect. Try again. Compute the depreciation expense for the year ended December 31, 2018. Sunland elected to depreciate the building on a straight-line basis and determined that the asset has a useful life of 30 years and a salvage value of $297,300. (Round answer to 0 decimal places, e.g.5,275.) Depreciation Expense 291763

Explanation / Answer

Weighted average rate

Short term loans $1595800 * 8% $127664

Long term loans $1002900 * 9% $90261

$2598700 $217925

Weighted average rate = $217925 / $2598700

= 8.38%

Avoidable interest :

2000100 * 10% $200010

1799000 * 8.38% $150756

3799100 $350766

Avoidable interest $350766

Total cost = $5251100 + $350766

= $5601866

Depreciation = $5601866 - $297300 / 30 years

= $176818.

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