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answer needed asap please. This is the solution for part a, please compute part b. Sheffield Furniture started construction of a combination office and warehouse
answer needed asap please.
This is the solution for part a, please compute part b.
Sheffield Furniture started construction of a combination office and warehouse building for its own use at an estimated cost of 4,380,000 on January 1, 2022. Sheffield expected to complete the building by December 31, 2022. Sheffield has the following debt obligations outstanding during the construction period. 1.790,000 Construction loan-14% interest, payable semiannually, issued December 31, 2021 Short-term loan-12% interest, payable monthly, and principal payable at maturity on May 30, 2023 Long-term loan-13% interest. payable on January 1 of each year, Principal payable on January 1, 2026 1.432,000 895,000 (a) Assume that Sheffield completed the office and warehouse building on December 31, 2022, as planned at a total cost of 4,654,000. The following expenditures were made during the period forthis project: January 1, 895,000: April 1, 1.295,000 July 1. 1.695,000; and October 1, 560,000. Excess funds from the construction loans were invested during the period and earned 19,800 of investment income. Compute the amount of borrowing costs to be capitalized for this project. (Use interest rates rounded to 2 decimal places, eg. 7.58% for computational purposes and round final answers to decimal places, eg. 5,275.) Borrowing costs Sheffield Furniture started construction of a combination office and warehouse building for its own use at an estimated cost of 4,380,000 on January 1, 2022. Sheffield expected to complete the building by December 31, 2022. Sheffield has the following debt obligations outstanding during the construction period. 1,790,000 Construction loan-14% interest, payable semiannually, issued December 31, 2021 Short-term loan-12% interest, payable monthly, and principal payable at maturity on May 30, 2023 1,432,000 Long-term loan-13% interest, payable on January 1 of each year. Principal payable on January 1, 2026 895,000 Your Answer Correct Answer * Your answer is incorrect. Assume that Sheffield completed the office and warehouse building on December 31, 2022, as planned at a total cost of 4.654.000. The following expenditures were made during the period forthis project: January 1, 895,000; April 1, 1,295.000; July 1, 1,695,000, and October 1, 560.000. Excess funds from the construction loans were invested during the period and earned 19,800 of investment income. Compute the amount of borrowing costs to be capitalized for this project. (Use interest rates rounded to 2 decimal places, eg. 7.58% for computational purposes and round final answers to decimal places, eg. 5,275) Borrowing costs 362492 DOLUTION ASSIStanice used Expenditure Allocated to Capitalization Period Specific General Borrowings Borrowings 895,000 Average Carrying Amount Date Amount 1/1 895,000 4/1 1.295,000 847.500 400,000 9/12 300,000 7/1 1,695,000 1,695,000 6/12 847,500 10/1 560,000 560.000 3/12 140,000 4,654,000 1.790,000 2,655,000 1,287,500 X Specific borrowings = Interest for the period - Investment Income = (1,695,000 x 14%) - 19,800 = 230.800 General borrowings = Average carrying amount Capitalization rate = 1,287,500 12.38% - 159.393*** Total borrowing costs capitalized - 230,800 + 159,393 = 390,193 Capitalization rate on general debt (1,432,000/2,327,000 x 12%) + (895,000/2,327,000 x 13%) = 12.38% ** Actual borrowing costs for the general debt for the year were 288,190 (1,432,000 x 12% + 895,000 13%) so the (b) Compute the depreciation expense for the year ended December 31, 2023. Sheffield elected to depreciate the building on a straight-line basis and determined that the asset has a useful life of 30 years and a residual value of 297,000. (Round answer too decimal places, eg. 5,275.) Depreciation Expense Step by Step Solution
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