Question

In: Accounting

Coronado Company is constructing a building. Construction began on February 1 and was completed on December...

Coronado Company is constructing a building. Construction began on February 1 and was completed on December 31. Expenditures were $1,872,000 on March 1, $1,272,000 on June 1, and $3,046,500 on December 31.

Coronado Company borrowed $1,007,900 on March 1 on a 5-year, 12% note to help finance construction of the building. In addition, the company had outstanding all year a 9%, 5-year, $2,397,800 note payable and an 10%, 4-year, $3,714,900 note payable. Compute avoidable interest for Coronado Company. Use the weighted-average interest rate for interest capitalization purposes. (Round percentages to 2 decimal places, e.g. 2.51% and final answer to 0 decimal places, e.g. 5,275.)

Solutions

Expert Solution

01-Mar    1,872,000.00 10/12    1,560,000.00
01-Jun    1,272,000.00 7/12        742,000.00
31-Dec    3,046,500.00                -                           -  
   6,190,500.00    2,302,000.00
   2,397,800.00 9%    215,802.00
   3,714,900.00 10%    371,490.00
   6,112,700.00    587,292.00

Weighted Average rate = 587,292/6112700 = 9.61

Avoidable Interest

   1,007,900.00 12%    120,948.00
   1,294,100.00 9.61%    124,333.69
   245,281.69

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