Question

Exercise 10-7 

Flint Furniture Company started construction of a combination office and warehouse building for its own use at an estimated cost of $4,957,500 on January 1, 2017. Flint expected to complete the building by December 31, 2017. Flint has the following debt obligations outstanding during the construction period. 

Construction loan-10% interest, payable semiannually, issued December 31, 2016 

Short-term loan-8% interest, payable monthly, and principal payable at maturity on May 30, 2018 

Long-term loan-9% interest, payable on January 1 of each year. Principal payable on January 1, 2021 $2,015,800 1,606,700 993,300 

Assume that Flint completed the office and warehouse building on December 31, 2017, as planned at a total cost of $5,195,900, and the weighted average amount of accumulated expenditures was $3,810,800. 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. )

Compute the depreciation expense for the year ended December 31, 2018. Flint 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 $299,200. (Round answer to O decimal places, e.g. 5,275.) Depreciation Expense $

Answer 1

Flint furniture company started construction of a combination office and warehouse building for its own use at an estimated cost of 4957500 on january 1 2017.
10-7) @ calculation of weighted Average Interest rate :- Type of loan shon term loan Principal 1,606 ,700 Anterest Rate 84. 2nterest 1,28,536 long term loan | 9,93 300 901 89,392 Total 2,600.000 2,17,933 Average weighted interest Rate Total Interes) Total Brinchal - 2,17.933 /2600000 29.384. Avalable Interest calculations - Particalar Perincipal balance of wrighted averase acambiated conditie Interest Rate Asiable Interest anterest on 1000 specifically for construction 94015,800 1042,00), 590 17,95,000 Interest on remaining loan up to weighted Aug expenditure total using weighted averose Interest rate 8.381 1,50,421 3,521001 Total 3.810.800 Avoidable Anterest - 3/52,001

b calculation of Depreciation Exper ses :- Total cost acost ancored tamenest capitalised = 5,195.900 + 352.001 5,547,901 Total cost - Salvage) value) / Estimated life time : (5,547 Aol -244200) 130 Yecors 4,74.956-7