Question

Skysong Company is constructing a building. Construction began on February 1 and was completed on December 31. Expenditures were $3,780,000 on March 1, $2,520,000 on June 1, and $6,300,000 on December 31.

Skysong Company borrowed $2,100,000 on March 1 on a 5-year, 10% note to help finance construction of the building. In addition, the company had outstanding all year a 12%, 5-year, $4,200,000 note payable and an 11%, 4-year, $7,350,000 note payable. Compute avoidable interest for Skysong Company. Use the weighted-average interest rate for interest capitalization purposes

Answer 1