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Metlock Inc. is a book distributor that had been operating in its original facility since 1995. The increase in certification programs and continuing education requirements in several professions has contributed to an annual growth rate of 15% for Metlock since 2020. Metlock's original facility became obsolete by early 2025 because of the increased sales volume and the fact that Metlock now carries DVDs in addition to books. On June 1, 2025, Metlock contracted with Black Construction to have a new building constructed for $4,800,000 on land owned by Metlock. The payments made by Metlock to Black Construction are shown in the schedule below. Date July 30, 2025 January 30, 2026 May 30, 2026 Total payments Amount $1,080,000 1,800,000 1,920,000 $4,800,000 Construction was completed and the building was ready for occupancy on May 27, 2026. Metlock 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 $2,400,000, dated April 1, 2022, with interest payable annually on April 1. 12%, 10-year bond issue of $3,600,000 sold at par on June 30, 2018, with interest payable annually on June 30.

Metlock Inc. is a book distributor that had been operating in its original facility since 1995. The increase in certification programs and continuing education requirements in several professions has contributed to an annual growth rate of 15% for Metlock since 2020. Metlock's original facility became obsolete by early 2025 because of the increased sales volume and the fact that Metlock now carries DVDs in addition to books. On June 1, 2025, Metlock contracted with Black Construction to have a new building constructed for $4,800,000 on land owned by Metlock. The payments made by Metlock to Black Construction are shown in the schedule below. Date July 30, 2025 January 30, 2026 May 30, 2026 Total payments Amount $1,080,000 1,800,000 1,920,000 $4,800,000 Construction was completed and the building was ready for occupancy on May 27, 2026. Metlock 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 $2,400,000, dated April 1, 2022, with interest payable annually on April 1. 12%, 10-year bond issue of $3,600,000 sold at par on June 30, 2018, with interest payable annually on June 30.

Financial Accounting: The Impact on Decision Makers
Financial Accounting: The Impact on Decision Makers
10th Edition
ISBN:9781305654174
Author:Gary A. Porter, Curtis L. Norton
Publisher:Gary A. Porter, Curtis L. Norton
Chapter13: Financial Statement Analysis
Section: Chapter Questions
Problem 13.7MCP
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Compute the avoidable interest on Metlock's new building

View Policies Show Attempt History Current Attempt in Progress Metlock Inc. is a book distributor that had been operating in its original facility since 1995. The increase in certification programs and continuing education requirements in several professions has contributed to an annual growth rate of 15% for Metlock since 2020. Metlock's original facility became obsolete by early 2025 because of the increased sales volume and the fact that Metlock now carries DVDs in addition to books. On June 1, 2025, Metlock contracted with Black Construction to have a new building constructed for $4,800,000 on land owned by Metlock. The payments made by Metlock to Black Construction are shown in the schedule below. Date July 30, 2025 January 30, 2026 May 30, 2026 Total payments Amount $1,080,000 1,800,000 1,920,000 $4,800,000 Construction was completed and the building was ready for occupancy on May 27, 2026. Metlock 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 $2,400,000, dated April 1, 2022, with interest payable annually on April 1. 12%, 10-year bond issue of $3,600,000 sold at par on June 30, 2018, with interest payable annually on June 30.
Transcribed Image Text:View Policies Show Attempt History Current Attempt in Progress Metlock Inc. is a book distributor that had been operating in its original facility since 1995. The increase in certification programs and continuing education requirements in several professions has contributed to an annual growth rate of 15% for Metlock since 2020. Metlock's original facility became obsolete by early 2025 because of the increased sales volume and the fact that Metlock now carries DVDs in addition to books. On June 1, 2025, Metlock contracted with Black Construction to have a new building constructed for $4,800,000 on land owned by Metlock. The payments made by Metlock to Black Construction are shown in the schedule below. Date July 30, 2025 January 30, 2026 May 30, 2026 Total payments Amount $1,080,000 1,800,000 1,920,000 $4,800,000 Construction was completed and the building was ready for occupancy on May 27, 2026. Metlock 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 $2,400,000, dated April 1, 2022, with interest payable annually on April 1. 12%, 10-year bond issue of $3,600,000 sold at par on June 30, 2018, with interest payable annually on June 30.
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