Bagwell Furniture Company started construction of a combinat…
Bagwell Furniture Company started construction of a combination office and warehouse building for its own use at an estimated cost of $2,500,000 on January 1, 2026. Bagwell expected to complete the building by December 31, 2026. Bagwell has the following debt obligations outstanding during the construction period. Construction loan—15% interest, payable semiannually, issued December 31, 2025 $1,000,000 Short-term loan—10% interest, payable monthly. Principal payable on May 30, 2027 700,000 Long-term loan—11% interest, payable on January 1 of each year. Principal payable on January 1, 2030 500,000 Instructions Assume that Bagwell completed the office and warehouse building on December 31, 2026, as planned, at a total cost of $2,600,000, and the weighted average of accumulated expenditures was $1,800,000. Compute (a) the avoidable interest, (b) actual interest, and (c) the amount of interest to be capitalized on this project.