Question
Larkspur Industries Inc. started construction of a manufacturing facility for its own use at an estimated cost of $ 9,800,000 on January 1, 2017. Larkspur
Larkspur Industries Inc. started construction of a manufacturing facility for its own use at an estimated cost of $ 9,800,000 on January 1, 2017. Larkspur expected to complete the building by December 31, 2017. Larkspurs debt, all of which was outstanding during the construction period, was as follows.
Construction loan 11% interest, payable semiannually, issued December 31, 2016; $ 4,900,000 | |||
Long-term loan #1 10% interest, payable on January 1 of each year. Principal payable on January 1, 2019; $ 1,470,000 | |||
Long-term loan #2 12% interest, payable on December 31 of each year. Principal payable on December 31, 2025; $ 3,430,000 |
(a)
Assume that Larkspur completed the facility on December 31, 2017, at a total cost of $ 10,094,000, and the weighted-average amount of accumulated expenditures was $ 6,664,000. Compute the avoidable interest on this project. (Use interest rates rounded to 2 decimal places, e.g. 7.58% and round final answer to 0 decimal places, e.g. 5,275.)
Avoidable Interest | $ enter the avoidable interest in dollars |
Step by Step Solution
There are 3 Steps involved in it
Step: 1
![blur-text-image](https://dsd5zvtm8ll6.cloudfront.net/includes/images/document_product_info/blur-text-image.webp)
Get Instant Access with AI-Powered Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
![blur-text-image](https://dsd5zvtm8ll6.cloudfront.net/includes/images/document_product_info/blur-subtext-image.webp)
Step: 3
![blur-text-image](https://dsd5zvtm8ll6.cloudfront.net/includes/images/document_product_info/blur-subtext-image.webp)
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started