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Martinez Furniture started construction of a combination office and warehouse building for its own use at an estimated cost of €4,360,000 on January 1, 2022. Martinez expected to complete the building by December 31, 2022. Martinez has the following debt obligations outstanding during the construction period. Construction loan-12% interest, payable semiannually, issued December 31, 2021 €1,780,000 Short-term loan-10% interest, payable monthly, and principal payable at maturity on May 30, 2023 1,424,000 Long-term loan-11% interest, payable on January 1 of each year. Principal payable on January 1, 2026 890,000

Martinez Furniture started construction of a combination office and warehouse building for its own use at an estimated cost of €4,360,000 on January 1, 2022. Martinez expected to complete the building by December 31, 2022. Martinez has the following debt obligations outstanding during the construction period. Construction loan-12% interest, payable semiannually, issued December 31, 2021 €1,780,000 Short-term loan-10% interest, payable monthly, and principal payable at maturity on May 30, 2023 1,424,000 Long-term loan-11% interest, payable on January 1 of each year. Principal payable on January 1, 2026 890,000

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Martinez Furniture started construction of a combination office and warehouse building for its own use at an estimated cost of €4,360,000 on January 1, 2022. Martinez expected to complete the building by December 31, 2022. Martinez has the following debt obligations outstanding during the construction period. Construction loan-12% interest, payable semiannually, issued December 31, 2021 €1,780,000 Short-term loan-10% interest, payable monthly, and principal payable at maturity on May 30, 2023 1,424,000 Long-term loan-11% interest, payable on January 1 of each year. Principal payable on January 1, 2026 890,000
Transcribed Image Text:Martinez Furniture started construction of a combination office and warehouse building for its own use at an estimated cost of €4,360,000 on January 1, 2022. Martinez expected to complete the building by December 31, 2022. Martinez has the following debt obligations outstanding during the construction period. Construction loan-12% interest, payable semiannually, issued December 31, 2021 €1,780,000 Short-term loan-10% interest, payable monthly, and principal payable at maturity on May 30, 2023 1,424,000 Long-term loan-11% interest, payable on January 1 of each year. Principal payable on January 1, 2026 890,000
Assume that Martinez completed the office and warehouse building on December 31, 2022, as planned at a total cost of €4,628,000. The following expenditures were made during the period forthis project: January 1, €890,000; April 1, €1,290,000 July 1, €1,690,000; and October 1, €560,000. Excess funds from the construction loans were invested during the period and earned €19,600 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 0 decimal places, e.g. 5,275.) Borrowing costs €
Transcribed Image Text:Assume that Martinez completed the office and warehouse building on December 31, 2022, as planned at a total cost of €4,628,000. The following expenditures were made during the period forthis project: January 1, €890,000; April 1, €1,290,000 July 1, €1,690,000; and October 1, €560,000. Excess funds from the construction loans were invested during the period and earned €19,600 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 0 decimal places, e.g. 5,275.) Borrowing costs €
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