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(Capitalization of Interest) McPherson Furniture...




(Capitalization of Interest) McPherson Furniture Company started construction of a combination office and warehouse building for its own use at an estimated cost of $7,280,000 on January 1, 2010. McPherson expected to complete the building by December 31, 2010. McPherson has the following debt obligations outstanding during the construction period. Construction loan?12% interest, payable semiannually, issued December 31, 2009 $2,800,000 Short-term loan?10% interest, payable monthly, and principal payable at maturity on May 30, 2011 1,960,000 Long-term loan?11% interest, payable on January 1 of each year. Principal payable on January 1, 2014 1,400,000 (a) Assume that McPherson completed the office and warehouse building on December 31, 2010, as planned at a total cost of $7,280,000, and the weighted average of accumulated expenditures was $5,040,000. Compute the avoidable interest on this project. (Round interest percentage to 2 decimal places, e.g. 12.25% and use this amount for future calculations. Round other intermediate calculations and the final answer to 0 decimal places, e.g. 250,200.)


Paper#5136 | Written in 18-Jul-2015

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