Kingbird Furniture Company started construction of a combination office and warehouse building for its own use at an estimated cost of $13,000,000 on January 1, 2025. Kingbird expected to complete the building by December 31, 2025. Kingbird has the following debt obligations outstanding during the construction period. Construction loan—12% interest, payable semiannually, issued December 31, 2024 $5,200,000 Short-term loan—10% interest, payable monthly, and principal payable at maturity on May 30, 2026 3,900,000 Long-term loan—11% interest, payable on January 1 of each year; principal payable on January 1, 2029 2,600,000 (a) Assume that Kingbird completed the office and warehouse building on December 31, 2025, as planned, at a total cost of $13,520,000, and the weighted-average amount of accumulated expenditures was $9,360,000. 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.)
Kingbird Furniture Company started construction of a combination office and warehouse building for its own use at an estimated cost of $13,000,000 on January 1, 2025. Kingbird expected to complete the building by December 31, 2025. Kingbird has the following debt obligations outstanding during the construction period. Construction loan—12% interest, payable semiannually, issued December 31, 2024 $5,200,000 Short-term loan—10% interest, payable monthly, and principal payable at maturity on May 30, 2026 3,900,000 Long-term loan—11% interest, payable on January 1 of each year; principal payable on January 1, 2029 2,600,000 (a) Assume that Kingbird completed the office and warehouse building on December 31, 2025, as planned, at a total cost of $13,520,000, and the weighted-average amount of accumulated expenditures was $9,360,000. 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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Question 1
Kingbird Furniture Company started construction of a combination office and warehouse building for its own use at an estimated cost of $13,000,000 on January 1, 2025. Kingbird expected to complete the building by December 31, 2025. Kingbird has the following debt obligations outstanding during the construction period.
| Construction loan—12% interest, payable semiannually, issued December 31, 2024 | $5,200,000 | |
| Short-term loan—10% interest, payable monthly, and principal payable at maturity on May 30, 2026 | 3,900,000 | |
| Long-term loan—11% interest, payable on January 1 of each year; principal payable on January 1, 2029 | 2,600,000 |
(a)
Assume that Kingbird completed the office and warehouse building on December 31, 2025, as planned, at a total cost of $13,520,000, and the weighted-average amount of accumulated expenditures was $9,360,000. 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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