Riverbed Furniture started construction of a combination office and warehouse building for its own use at an estimated cost of €4,440,000 on January 1, 2022. Riverbed expected to complete the building by December 31, 2022. Riverbed has the following debt obligations outstanding during the construction period.

Construction loan-10% interest, payable semiannually, issued December 31, 2021		€1,820,000
Short-term loan-8% interest, payable monthly, and principal payable at maturity on May 30, 2023		1,456,000
Long-term loan-9% interest, payable on January 1 of each year. Principal payable on January 1, 2026		910,000

(a) Assume that Riverbed completed the office and warehouse building on December 31, 2022, as planned at a total cost of €4,732,000. The following expenditures were made during the period for this project: January 1, €910,000; April 1, €1,310,000; July 1, €1,710,000; and October 1, €560,000. Excess funds from the construction loans were invested during the period and earned €20,400 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.)

(b) Compute the depreciation expense for the year ended December 31, 2023. Riverbed Furniture 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 €300,000.

Answer rating: 100% (QA)

Part a Use the following formula to calculate the amount of BORROWING COSTS to be capitalized for th... View the full answer