NashFurniture Company started construction of a combinationoffice and warehouse building for its own use at an estimated costof $4,500,000 on January 1, 2020. Nash expected to complete thebuilding by December 31, 2020. Nash has the following debtobligations outstanding during the construction period.
| Construction loan-12% interest, payable semiannually, issuedDecember 31, 2019 | | $1,800,000 |
| Short-term loan-10% interest, payable monthly, and principalpayable at maturity on May 30, 2021 | | 1,260,000 |
| Long-term loan-11% interest, payable on January 1 of each year.Principal payable on January 1, 2024 | | 900,000 |
(a)
Assume that Nash completed the office and warehouse building onDecember 31, 2020, as planned at a total cost of $4,680,000, andthe weighted-average amount of accumulated expenditures was$3,240,000. Compute the avoidable interest on this project.
*Answer 366,000 is incorrect.
(b)
Compute the depreciation expense for the year ended December 31,2021. Nash elected to depreciate the building on a straight-linebasis and determined that the asset has a useful life of 30 yearsand a salvage value of $270,000.
