Question
Exercise 10-07 xyze Company started construction of a combination office and warehouse building for its own use at an estimated cost of $13,500,000on January 1,
Exercise 10-07
xyze Company started construction of a combination office and warehouse building for its own use at an estimated cost of $13,500,000on January 1, 2020. Monty expected to complete the building by December 31, 2020. Monty has the following debt obligations outstanding during the construction period.
Construction loan-12% interest, payable semiannually, issued December 31, 2019$5,400,000Short-term loan-10% interest, payable monthly, and principal payable at maturity on May 30, 20213,780,000Long-term loan-11% interest, payable on January 1 of eachyear. Principal payable on January 1, 20242,700,000
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Assume that Monty completed the office and warehouse building on December 31, 2020, as planned at a total cost of $14,040,000, and the weighted-average amount of accumulated expenditures was $9,720,000. Compute the avoidable interest on this project. (Use interest rates rounded to 2 decimal places, e.g. 7.58% for computational purposes and round final answers to 0 decimal places, e.g. 5,275.)
Avoidable Interest$
Compute the depreciation expense for the year ended December 31, 2021. Monty elected to depreciate the building on a straight-line basis and determined that the asset has a useful life of30years and a salvage value of $810,000. (Round answer to 0 decimal places, e.g. 5,275.)
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