SandhillFurniture Company started construction of a combination office and warehouse building for its own use at an estimated cost of $10,000,000 on January 1, 2020. Sandhill expected to complete the building by December 31, 2020. Sandhill has the following debt obligations outstanding during the construction period. Construction loan-12% interest, payable semiannually, issued December 31, 2019 $4,000,000 Short-term loan-10% interest, payable monthly, and principal payable at maturity on May 30, 2021 3,000,000 Long-term loan-11% interest, payable on January 1 of each year. Principal payable on January 1, 2024 2,000,000 (a) Correct answer icon Your answer is correct. Assume that Sandhill completed the office and warehouse building on December 31, 2020, as planned at a total cost of $10,400,000, and the weighted-average amount of accumulated expenditures was $7,200,000. 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 $ Attempts: 4 of 9 used (b) Compute the depreciation expense for the year ended December 31, 2021. Sandhill elected to depreciate the building on a straight-line basis and determined that the asset has a useful life of 30 years and a salvage value of $600,000. (Round answer to 0 decimal places, e.g. 5,275.) Depreciation Expense $

Intermediate Accounting: Reporting And Analysis

3rd Edition

ISBN:9781337788281

Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Chapter14: Financing Liabilities: Bonds And Long-term Notes Payable

Section: Chapter Questions

Problem 13C

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(a)

Correct answer icon

Your answer is correct.

Assume that Sandhill completed the office and warehouse building on December 31, 2020, as planned at a total cost of $10,400,000, and the weighted-average amount of accumulated expenditures was $7,200,000. 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

Attempts: 4 of 9 used

(b)

Compute the depreciation expense for the year ended December 31, 2021. Sandhill elected to depreciate the building on a straight-line basis and determined that the asset has a useful life of 30 years and a salvage value of $600,000. (Round answer to 0 decimal places, e.g. 5,275.)

Depreciation Expense

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Construction loan-12% interest, payable semiannually, issued December 31, 2019		$4,000,000
Short-term loan-10% interest, payable monthly, and principal payable at maturity on May 30, 2021		3,000,000
Long-term loan-11% interest, payable on January 1 of each year. Principal payable on January 1, 2024		2,000,000