Reference no: EM133011687
Question - Flint Furniture started construction of a combination office and warehouse building for its own use at an estimated cost of €4,420,000 on January 1, 2022. Flint expected to complete the building by December 31, 2022. Flint has the following debt obligations outstanding during the construction period.
Construction loan-12% interest, payable semiannually, issued December 31, 2021 €1,810,000
Short-term loan-10% interest, payable monthly, and principal payable at maturity on May 30, 2023 1,448,000
Long-term loan-11% interest, payable on January 1 of each year. Principal payable on January 1, 2026 905,000
Assume that Flint completed the office and warehouse building on December 31, 2022, as planned at a total cost of €4,706,000. The following expenditures were made during the period for this project: January 1, €905,000; April 1, €1,305,000; July 1, €1,705,000; and October 1, €560,000. Excess funds from the construction loans were invested during the period and earned €20,200 of investment income. Compute the amount of borrowing costs to be capitalized for this project.
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