Vaughn Furniture Company started construction of a combination office and warehouse building for its own use at an estimated cost of $10,000,000 on January 1, 2025. Vaughn expected to complete the building by December 31, 2025. Vaughn 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) Avoidable interest $4,000,000 3,000,000 Assume that Vaughn completed the office and warehouse building on December 31, 2025, as planned, at a total cost of $10,400,000, and the weighted-average amount of accumulated expenditures was $7,200,000. 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, e.g. 5,275.) $ 2,000,000
Vaughn Furniture Company started construction of a combination office and warehouse building for its own use at an estimated cost of $10,000,000 on January 1, 2025. Vaughn expected to complete the building by December 31, 2025. Vaughn 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) Avoidable interest $4,000,000 3,000,000 Assume that Vaughn completed the office and warehouse building on December 31, 2025, as planned, at a total cost of $10,400,000, and the weighted-average amount of accumulated expenditures was $7,200,000. 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, e.g. 5,275.) $ 2,000,000
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:Vaughn Furniture Company started construction of a combination office and warehouse building for its own use at an
estimated cost of $10,000,000 on January 1, 2025. Vaughn expected to complete the building by December 31, 2025. Vaughn
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)
Assume that Vaughn completed the office and warehouse building on December 31, 2025, as planned, at a total cost of
$10,400,000, and the weighted-average amount of accumulated expenditures was $7,200,000. 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, e.g. 5,275.)
Avoidable interest
$4,000,000
3,000,000
2,000,000
$
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Transcribed Image Text:Assume that Vaughn completed the office and warehouse building on December 31, 2025, as planned, at a total cost of
$10,400,000, and the weighted-average amount of accumulated expenditures was $7,200,000. 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, e.g. 5,275.)
Avoidable interest
(b)
$
LA
Solution
eTextbook and Media
Depreciation expense $
Compute the depreciation expense for the year ended December 31, 2026. Vaughn elected to depreciate the building on a
straight-line basis and determined that the asset has a useful life of 30 years and a salvage value of $600,000. (Round
answer to O decimal places, e.g. 5,275.)
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