Novak Furniture Company started construction of a combination office and warehouse building for its own use at an estimated cost of $15,000,000 on January 1, 2025. Novak expected to complete the building by December 31, 2025. Novak has the following debt obligations outstanding during the construction period. Construction loan-12% interest, payable semiannually, issued December 31, 2024 Short-term loan-10% interest, payable monthly, and principal payable at maturity on May 30, 2026 Long-term loan-11% interest, payable on January 1 of each year; principal payable on January 1, 2029 $6,000,000 4,500,000 3,000,000
Novak Furniture Company started construction of a combination office and warehouse building for its own use at an estimated cost of $15,000,000 on January 1, 2025. Novak expected to complete the building by December 31, 2025. Novak has the following debt obligations outstanding during the construction period. Construction loan-12% interest, payable semiannually, issued December 31, 2024 Short-term loan-10% interest, payable monthly, and principal payable at maturity on May 30, 2026 Long-term loan-11% interest, payable on January 1 of each year; principal payable on January 1, 2029 $6,000,000 4,500,000 3,000,000
Intermediate Accounting: Reporting And Analysis
3rd Edition
ISBN:9781337788281
Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Chapter17: Advanced Issues In Revenue Recognition
Section: Chapter Questions
Problem 6P
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Question
Ee.52.
![Novak Furniture Company started construction of a combination office and warehouse building for its own use at an estimated cost of
$15,000,000 on January 1, 2025. Novak expected to complete the building by December 31, 2025. Novak has the following debt
obligations outstanding during the construction period.
Construction loan-12% interest, payable semiannually, issued December 31, 2024
Short-term loan-10% interest, payable monthly, and principal payable at maturity on May 30, 2026
Long-term loan-11% interest, payable on January 1 of each year; principal payable on January 1, 2029
(a)
Your answer is incorrect.
$6,000,000
Avoidable interest $
4,500,000
3,000,000
Assume that Novak completed the office and warehouse building on December 31, 2025, as planned, at a total cost of
$15,600,000, and the weighted-average amount of accumulated expenditures was $10,800,000. 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 O
decimal places, eg. 5,275.)](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F17c46bb9-669a-48fe-a175-0ad5e1ba70ef%2Fa219888d-c0c7-4b04-bd60-86cf0f9fa870%2F3smtzwo_processed.jpeg&w=3840&q=75)
Transcribed Image Text:Novak Furniture Company started construction of a combination office and warehouse building for its own use at an estimated cost of
$15,000,000 on January 1, 2025. Novak expected to complete the building by December 31, 2025. Novak has the following debt
obligations outstanding during the construction period.
Construction loan-12% interest, payable semiannually, issued December 31, 2024
Short-term loan-10% interest, payable monthly, and principal payable at maturity on May 30, 2026
Long-term loan-11% interest, payable on January 1 of each year; principal payable on January 1, 2029
(a)
Your answer is incorrect.
$6,000,000
Avoidable interest $
4,500,000
3,000,000
Assume that Novak completed the office and warehouse building on December 31, 2025, as planned, at a total cost of
$15,600,000, and the weighted-average amount of accumulated expenditures was $10,800,000. 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 O
decimal places, eg. 5,275.)
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