Problem:
Harrisburg Furniture Company started construction of a combination office and warehouse building for its own use at an estimated cost of $5,016,100 on January 1, 2014. Harrisburg expected to complete the building by December 31, 2014. Harrisburg has the following debt obligations outstanding during the construction period
Construction loan-12% interest, payable semiannually, issued December 31, 2013$2,011,800Short-term loan-10% interest, payable monthly, and principal payable at maturity on May 30, 20151,626,700Long-term loan-11% interest, payable on January 1 of each year; principal payable on January 1, 20181,027,800
Required:
Question 1: Assume that Harrisburg completed the office and warehouse building on December 31, 2014, as planned at a total cost of $5,215,400, and the weighted average amount of accumulated expenditures was $3,818,300. Compute the avoidable interest on this project.
Question 2: Compute the depreciation expense for the year ended December 31, 2015. 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 $317,200.
Note: Please describe comprehensively and provide step by step solution.