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Compute avoidable interest for Pearl Company

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Question - Pearl Company is constructing a building. Construction began on February 1 and was completed on December 31. Expenditures were $900,000 on March 1, $600,000 on June 1, and $1,500,000 on December 31.

Pearl Company borrowed $500,000 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, $1,000,000 note payable and an 11%, 4-year, $1,750,000 note payable. Compute avoidable interest for Pearl Company. Use the weighted-average interest rate for interest capitalization purposes.

Reference no: EM132854238

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