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9. Which of the following indicates that substantially all of

the activities are not yet complete?

a. Routine administrative work continues.

b. Minor modifications, such as the decoration of a

property to the purchaser's or user's specification,

are all that are outstanding.

c. Either a or b.

d. Neither a nor b.

10. On 1 January 2020 The Divine Company took out a 12%

P10 million loan to finance the construction of a building.

The key dates are as follows:

January 1 - Loan interest relating to the project

starts to be incurred

February 1 - Technical site planning commences

March 1 - Expenditures on the project start to be

incurred

April 1 - Construction work commences

November 1 - Substantially all of the activities

necessary to prepare the asset for

its intended use are complete

December 1 - Building brought into use

What amount of interest should Divine capitalize for

the current year?

11. On 1 January 2020 Imp Company borrowed P6 million at

an annual interest rate of 10% to finance the costs of

building an electricity generating plant. Construction

commenced on 1 January 2020 and cost P6 million. Not

all the cash borrowed was used immediately, so interest

income of P80,000 was generated by temporarily

investing some of the borrowed funds prior to use. The

project was completed on 30 November 2020. What is

the carrying amount of the plant at 30 November 2020?

12. Which statement is incorrect regarding capitalization of

'general' borrowing costs?

a. The entity shall determine the amount of

borrowing costs eligible for capitalization by

applying a capitalization rate to the expenditures

on that asset.

b. The capitalization rate shall be the weighted

average of the borrowing costs applicable to the

borrowings of the entity that are outstanding

during the period, other than borrowings made

specifically for the purpose of obtaining a

qualifying asset.

c. The amount of borrowing costs that an entity

capitalizes during a period shall not exceed the

amount of borrowing costs it incurred during that

period.

d. The entity shall determine the amount of

borrowing costs eligible for capitalization as the

actual borrowing costs incurred during the period

less any investment income on the temporary

investment of those borrowings.

13. Maragondon Company had the following borrowings

during 2020. The borrowings were made for general

purposes but the proceeds were used in part to finance

the construction of a new building:

Principal Interest

12% bank loan P10,000,000 P1,200,000

15% long-term loan 20,000,000 3,000,000

P30,000,000 P4,200,000

The construction began on January 1, 2020 and was

completed on December 31, 2020. Expenditures on

the building were made as follows:

January 1 P8,000,000

June 30 8,000,000

December 31 4,000,000

The capitalizable borrowing cost is?

14. During 2020, Grant Industries, Inc. constructed a new

manufacturing facility at a cost of P12,000,000. The

weighted average accumulated expenditures for 2020

were calculated to be P5,400,000. The company had

the following debt outstanding at December 31, 2020:

10 percent, five-year note to finance construction

of the manufacturing facility, dated January 1,

2020, P3,600,000.

12 percent, 20-year bonds issued at par on April

30, 2016, P8,400,000.

8 percent, six-year note payable, dated March 1,

2019, P1,800,000.

Determine the amount of interest to be capitalized by

Grant Industries for 2020.?

Use the following information for the next two questions.

Lodi Department Stores, Inc., constructs its own stores.

Additional information follows:

Total construction expenditures:

January 2, 2019 P 600,000

May 1, 2019 600,000

November 1, 2019 500,000

March 1, 2020 700,000

September 1, 2020 400,000

December 31, 2020 500,000

P3,300,000

Outstanding company debt:

Mortgage related directly to new store;

interest rate, 12%; term, 5 years

from beginning of construction P1,000,000

General liability:

Bonds issued just prior to construction

of store; interest rate, 10% for 10

years P 500,000

Bonds issued just prior to construction;

interest rate, 8%, mature in 5 years P1,000,000

Estimated cost of equity capital 14%

15. The capitalizable borrowing cost for 2019 is?

16. The capitalizable borrowing cost for 2020 is?

18. Which of the following is not a disclosure requirement

under PAS 23?

a. Accounting policy adopted for borrowing costs

b. Amount of borrowing costs capitalized during the

period

c. Capitalization rate used to determine the amount

of borrowing costs eligible for capitalization

d. Segregation of assets that are "qualifying assets"

from other assets on the balance sheet or as a

disclosure in the footnotes to the financial

statements