Larkspur Industries Inc. started construction of a manufacturing facility for its own use at an estimated cost of $ 12,200,000 on January 1, 2017. Larkspur expected to complete the building by December 31, 2017. Larkspur's debt, all of which was outstanding during the construction period, was as follows. Construction loan- 11% interest, payable semiannually, issued December 31, 2016; $ 6,100,000 Long-term loan #1 – 10% interest, payable on January 1 of each year. Principal payable on January 1, 2019; $ 1,830,000 Long-term loan #2– 12% interest, payable on December 31 of each year. Principal payable on December 31, 2025; $ 4,270,000 (a) 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

Larkspur Industries Inc. started construction of a manufacturing facility for its own use at an estimated cost of $ 12,200,000 on January 1, 2017. Larkspur expected to complete the building by December 31, 2017. Larkspur's debt, all of which was outstanding during the construction period, was as follows. Construction loan- 11% interest, payable semiannually, issued December 31, 2016; $ 6,100,000 Long-term loan #1 – 10% interest, payable on January 1 of each year. Principal payable on January 1, 2019; $ 1,830,000 Long-term loan #2– 12% interest, payable on December 31 of each year. Principal payable on December 31, 2025; $ 4,270,000 (a) 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

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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