Harrisburg Furniture Company started construction of a combination office and warehouse building for its own use at an estimated cost of $ 5,000,000 on January 1, 2020. Harrisburg expected to complete the building by December 31, 2020. Harrisburg has the following debt obligations outstanding during the construction period. Construction loan- 12% interest, payable semiannually, issued December 31, 2019 $ 2,000,000 Short-term loan- 10% interest, payable monthly, and principal payable at maturity on May 30, 2021 1,400,000 Long-term loan- 11% interest, payable on January 1 of each year. Principal payable on January 1, 2024 1,000,000
Assume that Harrisburg completed the office and warehouse building on December 31, 2017, as planned at a total cost of $5,200,000, and the weighted-average amount of accumulated expenditures was $3,600,000. Compute the avoidable interest on this project. (Use interest rates rounded to 2 decimal places, e.g. 7.58% for computational purposes and round final answers to 0 decimal places, e.g. 5,275.)
Compute the depreciation expense for the year ended December 31, 2018. Harrisburg elected to depreciate the building on a straight-line basis and determined that the asset has a useful life of 30 years and a salvage value of $300,000. (Round answer to 0 decimal places, e.g. 5,275.)