Flounder Furniture started construction of a combination office and warehouse building for its own use at an estimated cost of €4,260,000 on January 1,2022. Flounder expected to complete the building by December 31, 2022. Flounder has the following debt obligations outstanding during the construction period. Construction loan-12% interest, payable semiannually, issued December 31, 2021 €1,730,000 Short-term loan-10% interest, payable monthly. and principal payable at maturity on May 30, 2023 1,384,000 Long-term loan-11% interest, payable on January 1 of each year. Principal payable on January 1, 2026 865,000
Flounder Furniture started construction of a combination office and warehouse building for its own use at an estimated cost of €4,260,000 on January 1,2022. Flounder expected to complete the building by December 31, 2022. Flounder has the following debt obligations outstanding during the construction period. Construction loan-12% interest, payable semiannually, issued December 31, 2021 €1,730,000 Short-term loan-10% interest, payable monthly. and principal payable at maturity on May 30, 2023 1,384,000 Long-term loan-11% interest, payable on January 1 of each year. Principal payable on January 1, 2026 865,000
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question
![Assume that Flounder completed the office and warehouse building on December 31, 2022, as planned at a total cost of
€4,498,000. The following expenditures were made during the period forthis project: January 1, €865,000; April 1, €1,265,000;
July 1, €1,665,000; and October 1, €560,000. Excess funds from the construction loans were invested during the period and
earned €18,600 of investment income. Compute the amount of borrowing costs to be capitalized for this project. (Use interest
rates rounded to 2 decimal places, e.g. 7.58% for computational purposes and round final answers to O decimal places, e.g. 5,275.)
Borrowing costs
€](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F5053423f-d0a9-4ce5-b17c-e4fc240414ec%2F25f75642-efdd-45f3-9e77-cb9a45b4a58a%2F6ur7sq_processed.jpeg&w=3840&q=75)
Transcribed Image Text:Assume that Flounder completed the office and warehouse building on December 31, 2022, as planned at a total cost of
€4,498,000. The following expenditures were made during the period forthis project: January 1, €865,000; April 1, €1,265,000;
July 1, €1,665,000; and October 1, €560,000. Excess funds from the construction loans were invested during the period and
earned €18,600 of investment income. Compute the amount of borrowing costs to be capitalized for this project. (Use interest
rates rounded to 2 decimal places, e.g. 7.58% for computational purposes and round final answers to O decimal places, e.g. 5,275.)
Borrowing costs
€
![Flounder Furniture started construction of a combination office and warehouse building for its own use at an estimated cost of
€4,260,000 on January 1, 2022. Flounder expected to complete the building by December 31, 2022. Flounder has the following debt
obligations outstanding during the construction period.
Construction loan-12% interest, payable semiannually, issued December 31, 2021
€1,730,000
Short-term loan-10% interest, payable monthly, and principal payable at maturity on May 30, 2023
1,384,000
Long-term loan-11% interest, payable on January 1 of each year. Principal payable on January 1, 2026
865,000](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F5053423f-d0a9-4ce5-b17c-e4fc240414ec%2F25f75642-efdd-45f3-9e77-cb9a45b4a58a%2Fvnmowo_processed.jpeg&w=3840&q=75)
Transcribed Image Text:Flounder Furniture started construction of a combination office and warehouse building for its own use at an estimated cost of
€4,260,000 on January 1, 2022. Flounder expected to complete the building by December 31, 2022. Flounder has the following debt
obligations outstanding during the construction period.
Construction loan-12% interest, payable semiannually, issued December 31, 2021
€1,730,000
Short-term loan-10% interest, payable monthly, and principal payable at maturity on May 30, 2023
1,384,000
Long-term loan-11% interest, payable on January 1 of each year. Principal payable on January 1, 2026
865,000
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