Martinez Furniture started construction of a combination office and warehouse building for its own use at an estimated cost c €4,400,000 on January 1, 2022. Martinez expected to complete the building by December 31, 2022. Martinez has the followin obligations outstanding during the construction period. Construction loan-8% interest, payable semiannually, issued December 31, 2021 Short-term loan-6% interest, payable monthly, and principal payable at maturity on May 30, 2023 Long-term loan-7% interest, payable on January 1 of each year. Principal payable on January 1, 2026 (a) €1,800,000 1,440,000 900,000 Assume that Martinez completed the office and warehouse building on December 31, 2022, as planned at a total cost of €4,680,000. The following expenditures were made during the period forthis project: January 1, €900,000; April 1, €1,300,000; July 1, €1,700,000; and October 1, €560,000. Excess funds from the construction loans were invested during the period and earned €20,000 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.)
Martinez Furniture started construction of a combination office and warehouse building for its own use at an estimated cost c €4,400,000 on January 1, 2022. Martinez expected to complete the building by December 31, 2022. Martinez has the followin obligations outstanding during the construction period. Construction loan-8% interest, payable semiannually, issued December 31, 2021 Short-term loan-6% interest, payable monthly, and principal payable at maturity on May 30, 2023 Long-term loan-7% interest, payable on January 1 of each year. Principal payable on January 1, 2026 (a) €1,800,000 1,440,000 900,000 Assume that Martinez completed the office and warehouse building on December 31, 2022, as planned at a total cost of €4,680,000. The following expenditures were made during the period forthis project: January 1, €900,000; April 1, €1,300,000; July 1, €1,700,000; and October 1, €560,000. Excess funds from the construction loans were invested during the period and earned €20,000 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.)
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:Martinez Furniture started construction of a combination office and warehouse building for its own use at an estimated cost c
€4,400,000 on January 1, 2022. Martinez expected to complete the building by December 31, 2022. Martinez has the followir
obligations outstanding during the construction period.
Construction loan-8% interest, payable semiannually, issued December 31, 2021
€1,800,000
Short-term loan-6% interest, payable monthly, and principal payable at maturity on May 30, 2023
1,440,000
Long-term loan-7% interest, payable on January 1 of each year. Principal payable on January 1, 2026
900,000
(a)
Assume that Martinez completed the office and warehouse building on December 31, 2022, as planned at a total cost of
€4,680,000. The following expenditures were made during the period forthis project: January 1, €900,000; April 1, €1,300,000;
July 1, €1,700,000; and October 1, €560,000. Excess funds from the construction loans were invested during the period and
earned €20,000 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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