Construction was completed and the building was ready for occupancy on May 27, 2026. Nash had no new borrowings directlyassociated with the new building but had the following debt outstanding at May 31, 2026, the end of its fiscal year.10%, 5-year note payable of $2,080,000, dated April 1, 2022, with interest payable annually on April 1.12%, 10-year bond issue of $3,120,000 sold at par on June 30, 2018, with interest payable annually on June 30.The new building qualifies for interest capitalization. The effect of capitalizing the interest on the new building, compared with theeffect of expensing the interest, is material.Compute the avoidable interest on Nash's new building. (Round intermediate percentage calculation to 1 decimal place, e.g. 15.6% andfinal answer to O decimal places, e.g. 5,125.)Avoidable interest $ Nash Inc. is a book distributor that had been operating in its original facility since 1995. The increase in certification programs andcontinuing education requirements in several professions has contributed to an annual growth rate of 15% for Nash since 2020.Nash's original facility became obsolete by early 2025 because of the increased sales volume and the fact that Nash now carries DVDsin addition to books.On June 1, 2025, Nash contracted with Black Construction to have a new building constructed for $4,160,000 on land owned by Nash.The payments made by Nash to Black Construction are shown in the schedule below.DateJuly 30, 2025January 30, 2026May 30, 2026Total paymentsAmount$936,0001,560,0001,664,000$4,160,000Construction was completed and the building was ready for occupancy on May 27, 2026. Nash had no new borrowings directlyassociated with the new building but had the following debt outstanding at May 31, 2026, the end of its fiscal year.10%, 5-year note payable of $2,080,000, dated April 1, 2022, with interest payable annually on April 1.

Avoidable Interest Avoidable interest is that portion of total interest cost which would not have…

Construction was completed and the building was ready for occupancy on May 27, 2026. Nash had no new borrowings directly associated with the new building but had the following debt outstanding at May 31, 2026, the end of its fiscal year. 10%, 5-year note payable of $2,080,000, dated April 1, 2022, with interest payable annually on April 1. 12%, 10-year bond issue of $3,120,000 sold at par on June 30, 2018, with interest payable annually on June 30. The new building qualifies for interest capitalization. The effect of capitalizing the interest on the new building, compared with the effect of expensing the interest, is material. Compute the avoidable interest on Nash's new building. (Round intermediate percentage calculation to 1 decimal place, e.g. 15.6% and final answer to O decimal places, e.g. 5,125.) Avoidable interest $

Construction was completed and the building was ready for occupancy on May 27, 2026. Nash had no new borrowings directly associated with the new building but had the following debt outstanding at May 31, 2026, the end of its fiscal year. 10%, 5-year note payable of $2,080,000, dated April 1, 2022, with interest payable annually on April 1. 12%, 10-year bond issue of $3,120,000 sold at par on June 30, 2018, with interest payable annually on June 30. The new building qualifies for interest capitalization. The effect of capitalizing the interest on the new building, compared with the effect of expensing the interest, is material. Compute the avoidable interest on Nash's new building. (Round intermediate percentage calculation to 1 decimal place, e.g. 15.6% and final answer to O decimal places, e.g. 5,125.) Avoidable interest $

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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