ACCT 401L Lab Assignment #7 PPE
McPherson Furniture Company started construction of a combination office and warehouse
building for its own use at an estimated cost of $5,000,000 on January 1, 2010. McPherson
expected to complete the building by Dec 31, 2010. McPherson has the following debt
obligations outstanding during the construction period.
Construction loan-12%interest, payable semiannually, issued December 31, 2009 $2,000,000;
Short-term loan-10% interest, payable monthly and principal payable at maturity on May 30,
Long-term loan-11% interest, payable on Jan 1 of each year. Principal payable on Jan 1, 2014
(carry all computations to two decimal places)
(a) Assume that McPherson completed the office and warehouse building on December 31,
2010. As planned at a total cost of $ 5,200,000, and the weighted average of accumulated
expenditures was $3,800,000. Compute the avoidable interest on this project.