Martinez Company is constructing a building. Construction began on February 1 an

Question

Martinez Company is constructing a building. Construction began on February 1 and was completed on December 31. Expenditures were $2,040,000 on March 1, $1,320,000 on June 1, and $3,044,500 on December 31. Martinez Company borrowed $1,026,000 on March 1 on a 5-year, 13% note to help finance construction of the building. In addition, the company had outstanding all year a 10%, 5-year, $2,084,800 note payable and an 11%, 4-year, $3,796,400 note payable. Compute avoidable interest for Martinez Company. Use the weighted-average interest rate for interest capitalization purposes. (Round percentages to 2 decimal places, e.g. 2.51% and final answer to 0 decimal places, e.g. 5,275.) Avoidable interest

incorrect answer 270218

Explanation / Answer

Avoidable Interest is as calculated below:

Months outstanding Average Investment Mar-01 2,040,000 10 1,700,000 Jun-01 1,320,000 7 770,000 Dec-31 3,044,500 0 0 2,470,000

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