Determine the amount of avoidable interest

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Question - On January 1, 2021, Greenwood Co. began construction of a building to be used as its office headquarters. The building is expected to be completed on December 31, 2021. Expenditures on this project during 2021 were as follows:

January 1st $150,000

April 1st 280,000

August 1st 240,000

October 31st 153,000

On Jan. 1, 2021, the company obtained a $ 420,000 specific construction loan with a 7% interest rate. The loan was outstanding during the entire construction period. The company's other interest-bearing debts included two long-term notes of $ 600,000 and $700,000 with interest rates of 6% and 10%, respectively. Both notes were outstanding during the entire construction period.

Required -

(a) Determine the amount of interest capitalized for 2021.

(b) Regardless of your answer in (a), determine the amount of avoidable interest for 2021 assuming that the WA accumulated expenditure is $340,000 (other things being equal).

Reference no: EM133052592

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