Skysong Industries Inc. started construction of a manufacturing facility for its own use at an estimated cost of $11,000,000 on January 1, 2017. Skysong expected to complete the building by December 31, 2017. Skysong’s debt, all of which was outstanding during the construction period, was as follows. ● Construction loan—11% interest, payable semiannually, issued December 31, 2016; $5,500,000 ● Long-term loan #1 – 10% interest, payable on January 1 of each year. Principal payable on January 1, 2019; $1,650,000 ● Long-term loan #2—12% interest, payable on December 31 of each year. Principal payable on December 31, 2025; $3,850,000 (a) Assume that Skysong completed the facility on December 31, 2017, at a total cost of $11,330,000, and the weighted-average amount of accumulated expenditures was $7,480,000. 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 $enter the avoidable interest in dollars
Skysong Industries Inc. started construction of a manufacturing facility for its own use at an estimated cost of $11,000,000 on January 1, 2017. Skysong expected to complete the building by December 31, 2017. Skysong’s debt, all of which was outstanding during the construction period, was as follows. ● Construction loan—11% interest, payable semiannually, issued December 31, 2016; $5,500,000 ● Long-term loan #1 – 10% interest, payable on January 1 of each year. Principal payable on January 1, 2019; $1,650,000 ● Long-term loan #2—12% interest, payable on December 31 of each year. Principal payable on December 31, 2025; $3,850,000 (a) Assume that Skysong completed the facility on December 31, 2017, at a total cost of $11,330,000, and the weighted-average amount of accumulated expenditures was $7,480,000. 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 $enter the avoidable interest in dollars
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Skysong Industries Inc. started construction of a manufacturing facility for its own use at an estimated cost of $11,000,000 on January 1, 2017. Skysong expected to complete the building by December 31, 2017. Skysong’s debt, all of which was outstanding during the construction period, was as follows.
| ● | Construction loan—11% interest, payable semiannually, issued December 31, 2016; $5,500,000 | ||
| ● | Long-term loan #1 – 10% interest, payable on January 1 of each year. Principal payable on January 1, 2019; $1,650,000 | ||
| ● | Long-term loan #2—12% interest, payable on December 31 of each year. Principal payable on December 31, 2025; $3,850,000 |
(a)
Assume that Skysong completed the facility on December 31, 2017, at a total cost of $11,330,000, and the weighted-average amount of accumulated expenditures was $7,480,000.
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.)
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 |
$enter the avoidable interest in dollars
|
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