Answered step by step
Verified Expert Solution
Question
1 Approved Answer
Vaughn 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.
Vaughn 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. Vaughn expected to complete the building by December 31,2022 . Vaughn has the following debt obligations outstanding during the construction period. Construction loan-12\% interest, payable semiannually, issued December 31, 2021 Short-term loan-10\% interest, payable monthly, and principal payable at maturity on May 30, 2023 Long-term loan-11\% interest, payable on January 1 of each year. Principal payable on January 1, 2026 1,780,0001,424,000890,000 (a) Assume that Vaughn 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.)
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started