McPherson Furniture Company started construction of a combination office and warehouse building for its own use at

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McPherson Furniture Company started construction of a combination office and warehouse building for its own use at an estimated cost of €5,000,000 on January 1, 2015. McPherson expected to complete the building by December 31, 2015. McPherson has the following debt obligations outstanding during the construction period.

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Instructions (Carry all computations to two decimal places.)

(a) Assume that McPherson completed the office and warehouse building on December 31, 2015, as planned at a total cost of €5,200,000, and the weighted-average accumulated expenditures was €3,800,000. Compute the avoidable interest on this project.

(b) Compute the depreciation expense for the year ended December 31, 2016. McPherson elected to depreciate the building on a straight-line basis and determined that the asset has a useful life of 30 years and a residual value of €300,000.

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Intermediate Accounting IFRS Edition

ISBN: 9781118443965

2nd Edition

Authors: Donald E. Kieso, Jerry J. Weygandt, Terry D. Warfield

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