Answer:
Note: The complete question is attached as picture
1. Avoidable interest on construction loan = $6,000,000 * 12% = $672,000
Calculation of weighted average interest rate on general loan
Loan Amount Interest rate Interest (Amount*rate)
Short term loan 3,920,000 10% 392,000
Long term loan 2,800,000 11% 308,000
Total 6,720,000 700,000
Weighted average interest rate = 700,000 / 6,720,000
Weighted average interest rate =0.10416667
Weighted average interest rate = 10.42%
Avoidable interest on remaining expenditure = ($10,080,000 - $5,600,000) * 10.42%
Avoidable interest on remaining expenditure = $4480000 * 10.42%
Avoidable interest on remaining expenditure = $466,816
Total avoidable interest = $672,000 + $466,816
Total avoidable interest = $1,138,816
2. Total cost of building capitalized = $14,560,000 + $1,138,816
Total cost of building capitalized = $15,698,816
Depreciation expenses = Cost - Salvage value / Useful life
Depreciation expenses = $15,698,816 - $840,000 / 30 years
Depreciation expenses = $14,858,816 / 30 years
Depreciation expenses = $495293.86667
Depreciation expenses = $495,293.87
