BlossomFurniture Company started construction of a combination office and warehouse building for its own use at an estimated cost of $7,000,000 on January 1, 2020. Blossom expected to complete the building by December 31, 2020. Blossom has the following debt obligations outstanding during the construction period. Construction loan-12% interest, payable semiannually, issued December 31, 2019 $2,800,000 Short-term loan-10% interest, payable monthly, and principal payable at maturity on May 30, 2021 1,960,000 Long-term loan-11% interest, payable on January 1 of each year. Principal payable on January 1, 2024 1,400,000 Assume that Blossom completed the office and warehouse building on December 31, 2020, as planned at a total cost of $7,280,000, and the weighted-average amount of accumulated expenditures was $5,040,000. 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.
BlossomFurniture Company started construction of a combination office and warehouse building for its own use at an estimated cost of $7,000,000 on January 1, 2020. Blossom expected to complete the building by December 31, 2020. Blossom has the following debt obligations outstanding during the construction period. Construction loan-12% interest, payable semiannually, issued December 31, 2019 $2,800,000 Short-term loan-10% interest, payable monthly, and principal payable at maturity on May 30, 2021 1,960,000 Long-term loan-11% interest, payable on January 1 of each year. Principal payable on January 1, 2024 1,400,000 Assume that Blossom completed the office and warehouse building on December 31, 2020, as planned at a total cost of $7,280,000, and the weighted-average amount of accumulated expenditures was $5,040,000. 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.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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BlossomFurniture Company started construction of a combination office and warehouse building for its own use at an estimated cost of $7,000,000 on January 1, 2020. Blossom expected to complete the building by December 31, 2020. Blossom has the following debt obligations outstanding during the construction period.
| Construction loan-12% interest, payable semiannually, issued December 31, 2019 | $2,800,000 | |
| Short-term loan-10% interest, payable monthly, and principal payable at maturity on May 30, 2021 | 1,960,000 | |
| Long-term loan-11% interest, payable on January 1 of each year. Principal payable on January 1, 2024 | 1,400,000 |
Assume that Blossom completed the office and warehouse building on December 31, 2020, as planned at a total cost of $7,280,000, and the weighted-average amount of accumulated expenditures was $5,040,000. 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.)
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