BlueFurniture 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. Blue expected to complete the building by December 31, 2020. Blue has the following debt obligations outstanding during the construction period.Construction loan- 12% interest, payable semiannually, issued December 31, 2019 $ 2,800,000Short-term loan- 10% interest, payable monthly, and principal payable at maturity on May 30, 2021 2,100,000Long-term loan- 11% interest, payable on January 1 of each year. Principal payable on January 1, 2024 1,400,000 **Compute the Depreciation Expense**To calculate the depreciation expense for the year ending December 31, 2021, follow these instructions. The method used is the straight-line basis. The asset in question is a building with the following details:- **Useful Life:** 30 years- **Salvage Value:** $420,000*Important:* Round your answer to 0 decimal places (e.g., 5,275).**Depreciation Expense Calculation:**- Enter your answer in the box provided.**Depreciation Expense:** $ [________] **Project Interest Calculation**Assume that Blue 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 $5,040,000. Compute the avoidable interest on this project.*Note: Use interest rates rounded to 2 decimal places, e.g., 7.58% for computational purposes and round final answers to 0 decimal places, e.g., 5,275.***Avoidable Interest:**$ 568,960

Depreciation is the amount of expense which is recorded to report the regular wear and tear in the…

Answered: BlueFurniture Company started…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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BlueFurniture 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. Blue expected to complete the building by December 31, 2020. Blue 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		2,100,000
Long-term loan- 11% interest, payable on January 1 of each year. Principal payable on January 1, 2024		1,400,000

**Compute the Depreciation Expense**

To calculate the depreciation expense for the year ending December 31, 2021, follow these instructions. The method used is the straight-line basis. The asset in question is a building with the following details:

- **Useful Life:** 30 years
- **Salvage Value:** $420,000

*Important:* Round your answer to 0 decimal places (e.g., 5,275).

**Depreciation Expense Calculation:**

- Enter your answer in the box provided.

**Depreciation Expense:** $ [________]

**Project Interest Calculation**

Assume that Blue 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.

*Note: 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:**

$ 568,960

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