Question
Metlock Furniture started construction of a combination office and warehouse building for its own use at an estimated cost of 4,080,000 on January 1, 2022.
Metlock Furniture started construction of a combination office and warehouse building for its own use at an estimated cost of 4,080,000 on January 1, 2022. Metlock expected to complete the building by December 31, 2022. Metlock has the following debt obligations outstanding during the construction period.
Construction loan-14% interest, payable semiannually, issued December 31, 2021 | 1,640,000 | |
Short-term loan-12% interest, payable monthly, and principal payable at maturity on May 30, 2023 | 1,312,000 | |
Long-term loan-13% interest, payable on January 1 of each year. Principal payable on January 1, 2026 | 820,000 |
Assume that Metlock completed the office and warehouse building on December 31, 2022, as planned at a total cost of 4,264,000. The following expenditures were made during the period forthis project: January 1, 820,000; April 1, 1,220,000; July 1, 1,620,000; and October 1, 540,000. Excess funds from the construction loans were invested during the period and earned 16,800 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 | enter the borrowing costs in euros |
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