On January 1, 2020, Southtree Co. began construction of a building to be used as its office headquarters. The building is expected to be completed on December 31, 2020. Expenditures on this project during 2020 were as follows:

January 1^st $100,000

March 1^st 360,000

June 1^st 270,000

October 31^st 153,000

On Jan. 1,2020, the company obtained a $500,000 specificconstruction loanwith a 6% interest rate. The loan was outstanding during the entire construction period. The companys other interest-bearing debts included two long-term notes of $400,000 and $700,000 with interest rates of 8% and 10%, respectively. Both notes were outstanding during the entire construction period.

Instruction:

(a) Determine the amount of interest capitalized for 2020. Please show your work (i.e. WA accumulated expenditure, actual interest, WA interest rate, and avoidable interest) to support your final answer. Please round the WA interest rate to the 4th decimal placewhen necessary.

Answer: The amount of interest capitalized for 2020 is .

(b) Regardless of your answer in (a), determine the amount of avoidable interestfor 2020 assumingthat the WA accumulated expenditure is $460,000(other things being equal).

Answer: The amount of avoidable interest for 2020 is .