Question: PAUL CABLE SOURCE STARTED CONSTRUCTION ON A COMBINATION OFFICE AND WAREHOUSE BUILDING FOR ITS OWN USE FOR AN ESTIMATED COST OF $4,500,000 ON JANUARY 1

PAUL CABLE SOURCE STARTED CONSTRUCTION ON A COMBINATION OFFICE AND WAREHOUSE BUILDING FOR ITS OWN USE FOR AN ESTIMATED COST OF $4,500,000 ON JANUARY 1 2019. SHAWN EXPECTED TO COMPLETE THE PROJECT BY DEC 31ST 2019. SHAWN HAS THE FOLLOWING DEBT OBLIGATIONS OUTSTANDING DURING THE CONSTRUCTION PERIOD: CONSTRUCTION LOAN 9% INTEREST PAYABLE SEMIANNUALLY ISSUE DEC 31ST 2018 $2,500,000.00

SHORT TERM LOAN 10 % INTEREST PAYABLE MONTHLY, AND PRINCIPAL PAYABLE AT MATURITY MAY 30 2020 $1,400,000.00

LONG TERM NOTE 11 % INTEREST PAYABLE JAN 1 OF EACH YEAR PRINCIPAL PAY PAYABLE $1,000,000.00 ON JAN 1ST 2022.

A. ASSUME SHAWN COMPLETED AS PLANNED ON DEC 31ST 2019 FOR A TOTAL COST OF $4,700,000 AND A WEIGHTED AVERAGE COST OF ACCUMULATED EXPENDITURES WAS $3,600,000. COMPUTE THE AVOIDABLE INTEREST ON THIS PROJECT.

B. COMPUTE THE DEPRECIATION AMOUNT FOR YEAR ENDED DEC 31 2020. SHAWN ELECTED TO DEPRECIATE BUILDING ON A STRAIGHT LINE BASIS AND HAS DETERMINED THE ASSET TO HAVE A USEFUL LIFE OF 20 YEARS WITH A SALVAGE VALUE OF $200,000.

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