Assume that Larkspur completed the facility on December 31, 2017, at a total cost of $ 12,566,000, and the weighted-average amount of accumulated expenditures was $ 8,296,000. 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 $ 921,344

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
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**Project Details:**

Assume that Larkspur completed the facility on December 31, 2017, at a total cost of $12,566,000. The weighted-average amount of accumulated expenditures was $8,296,000.

**Task A: Compute the Avoidable Interest**

- Instructions: Compute the avoidable interest on this project. (Note: Use interest rates rounded to two decimal places, e.g., 7.58%, and round the final answer to 0 decimal places.)
  
- **Avoidable Interest:** $921,344

**Task B: Compute the Depreciation Expense**

- Instructions: Compute the depreciation expense for the year ended December 31, 2018. Larkspur estimated the facility’s useful life to be 25 years, with a salvage value of $1,220,000. Larkspur elected to depreciate the facility on a straight-line basis.
  
- **Depreciation Expense:** (Field left blank for student input)

**Tools Available:** eTextbook and Media

**Attempts:** Unlimited

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Transcribed Image Text:--- **Project Details:** Assume that Larkspur completed the facility on December 31, 2017, at a total cost of $12,566,000. The weighted-average amount of accumulated expenditures was $8,296,000. **Task A: Compute the Avoidable Interest** - Instructions: Compute the avoidable interest on this project. (Note: Use interest rates rounded to two decimal places, e.g., 7.58%, and round the final answer to 0 decimal places.) - **Avoidable Interest:** $921,344 **Task B: Compute the Depreciation Expense** - Instructions: Compute the depreciation expense for the year ended December 31, 2018. Larkspur estimated the facility’s useful life to be 25 years, with a salvage value of $1,220,000. Larkspur elected to depreciate the facility on a straight-line basis. - **Depreciation Expense:** (Field left blank for student input) **Tools Available:** eTextbook and Media **Attempts:** Unlimited ---
**Larkspur Industries Inc. Construction Project Financing Overview**

On January 1, 2017, Larkspur Industries Inc. initiated the construction of a manufacturing facility for its own use, with an estimated cost of $12,200,000. The company projected to complete the building by December 31, 2017. To finance this construction, Larkspur had several debts outstanding during the construction period:

1. **Construction Loan**
   - Interest Rate: 11%
   - Payment Frequency: Semiannually
   - Date Issued: December 31, 2016
   - Loan Amount: $6,100,000

2. **Long-term Loan #1**
   - Interest Rate: 10%
   - Payment Frequency: Annually on January 1
   - Principal Due Date: January 1, 2019
   - Loan Amount: $1,830,000

3. **Long-term Loan #2**
   - Interest Rate: 12%
   - Payment Frequency: Annually on December 31
   - Principal Due Date: December 31, 2025
   - Loan Amount: $4,270,000

These loans were structured to support the financial outlay needed for the facility's construction, providing necessary liquidity to cover construction expenses during the designated period.
Transcribed Image Text:**Larkspur Industries Inc. Construction Project Financing Overview** On January 1, 2017, Larkspur Industries Inc. initiated the construction of a manufacturing facility for its own use, with an estimated cost of $12,200,000. The company projected to complete the building by December 31, 2017. To finance this construction, Larkspur had several debts outstanding during the construction period: 1. **Construction Loan** - Interest Rate: 11% - Payment Frequency: Semiannually - Date Issued: December 31, 2016 - Loan Amount: $6,100,000 2. **Long-term Loan #1** - Interest Rate: 10% - Payment Frequency: Annually on January 1 - Principal Due Date: January 1, 2019 - Loan Amount: $1,830,000 3. **Long-term Loan #2** - Interest Rate: 12% - Payment Frequency: Annually on December 31 - Principal Due Date: December 31, 2025 - Loan Amount: $4,270,000 These loans were structured to support the financial outlay needed for the facility's construction, providing necessary liquidity to cover construction expenses during the designated period.
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