In June of 2020 , Outboard Hi-Tech Company began to construct a manufacturing plant at...
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In June of 2020 , Outboard Hi-Tech Company began to construct a manufacturing plant at a total cost of $5,600,000. The weighted average of accumulated expenditures during construction totaled $3,775,000. The construction took exactly 12 months from start to completion. The company had the following loans outstanding during the 12-month construction period. 1. Construction loan of $3,000,000 to help with the manufacturing plant's construction related costs. Interest rate of 5.5% with interest payable monthly. 2. Working Capital Loan $700,000. Interest rate of 5% payable monthly; full balance of $700,000 to be paid off in 2024 . 3. Line of Credit outstanding in the amount of $400,000. Interest rate of 6% payable monthly. Line of credit to be renewed and/or paid off in 2023. Instructions - show all of your work in doing the following: 1. Compute the amount of "Avoidable Interest". 2. When the building is completed, what will be the total cost recorded on the company's books? Note: you do NOT need to do a journal entry, just calculate the total cost of the building that will be reported on the company's books
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