Intermediate Accounting
1st Edition
ISBN: 9780132162302
Author: Elizabeth A. Gordon, Jana S. Raedy, Alexander J. Sannella
Publisher: PEARSON
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Question
Chapter 11, Problem 11.5BE
To determine
The amount of interest to be capitalized during the year.
Given information:
Amount of notes payable issued is $ 2,200,000.
Time period is 2 years.
Interest rate is 8%.
Interest income earned is $3,000.
Expenditures are given for the 1st year.
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On January 1, 2023, Cake Company had the following general borrowings. A part of the proceeds was used to finance the construction of a qualifying asset:
12% bank loan (1.5 years)-P1,000,000
10% bank loan (3-year)-P8,000,000
Expenditures made on the qualifying asset were as follows:
Jan. 1-P5,000,000
March 1-P4,000,000
August 31-P3,000,000
December 1-P2,000,000
Construction was completed on December 31, 2023.
How much is the cost of the qualifying asset on initial recognition?
Use the following information for the next two questions:
On January 1, 20x1, Entity A had the following general borrowings. A part of the proceeds was
used to finance the construction of a qualifying asset:
Principal
P1,000,000
12% bank loan (1.5 years)
10% bank loan (3-year)
P8,000,000
Expenditures made on the qualifying asset were as follows:
Jan.1
P 5,000,000
4,000,000
March 1
August 31
December 1
3,000,000
2,000,000
Construction was completed on December 31, 20x1.
.How much borrowing costs are capitalized to the cost of the constructed qualifying asset?
Use the following information for the next two questions:
On January 1, 20x1, Entity A had the following general borrowings. A part of the proceeds was used to finance the construction of a qualifying asset:
Principal
12% bank loan (1.5 years) ₱ 1,000,000
10% bank loan (3-year) 8,000,000
Expenditures made on the qualifying asset were as follows:
Jan. 1 ₱ 5,000,000
March 1 4,000,000
August 31 3,000,000
December 1 2,000,000
Construction was completed on December 31, 20x1.
How much borrowing costs are capitalized to the cost of the constructed qualifying asset?
1,045,000 c. 1,026,667
971,111 d. 920,000
How much is the cost of the qualifying asset on initial recognition?
13,010,000 c. 14,920,000
15,045,000 d. 14,971,111
Chapter 11 Solutions
Intermediate Accounting
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