Question

ronghorn Company is constructing a building. Construction began on February 1 and was completed on December 31. Expenditures were $1,080,000 on March 1, $720,000 on June 1, and $1,800,000 on December 31.

Pronghorn Company borrowed $600,000 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 10%, 5-year, $1,200,000 note payable and an 11%, 4-year, $2,100,000 note payable.

Compute avoidable interest for Pronghorn Company. Use the weighted-average interest rate for interest capitalization purposes.

Answer 1

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