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Compute avoidable interest for Flounder Company

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Question - Flounder Company is constructing a building. Construction began on February 1 and was completed on December 31. Expenditures were $1,980,000 on March 1, $1,320,000 on June 1, and $3,300,000 on December 31.

Flounder Company borrowed $1,100,000 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, $2,200,000 note payable and an 11%, 4-year, $3,850,000 note payable. Compute avoidable interest for Flounder Company. Use the weighted-average interest rate for interest capitalization purposes.

Reference no: EM132599981

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