Reference no: EM132496498
Blue Company is constructing a building. Construction began on February 1 and was completed on December 31. Expenditures were $4,500,000 on March 1, $3,000,000 on June 1, and $7,500,000 on December 31.
Question 1: Blue Company borrowed $2,500,000 on March 1 on a 5-year, 12% note to help finance construction of the building. In addition, the company had outstanding all year a 14%, 5-year, $5,000,000 note payable and an 11%, 4-year, $8,750,000 note payable. Compute avoidable interest for Blue Company. Use the weighted-average interest rate for interest capitalization purposes.