Sheridan Furniture Company started construction of a combination office and warehouse building for its own use at an estimated cost of $5,018,300 on January 1, 2017. Sheridan expected to complete the building by December 31, 2017. Sheridan has the following debt obligations outstanding during the construction period.

Construction loan-12% interest, payable semiannually, issued December 31, 2016 $2,002,400

Short-term loan-10% interest, payable monthly, and principal payable at maturity on May 30, 2018 1,600,100

Long-term loan-11% interest, payable on January 1 of each year. Principal payable on January 1, 2021 1,000,600

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(a)

Assume that Sheridan completed the office and warehouse building on December 31, 2017, as planned at a total cost of $5,249,900, and the weighted-average amount of accumulated expenditures was $3,795,000. 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

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