Question
On December 31, 2019, Joross Company borrowed P3,000,000 and issued a 12%, 3-year note to finance the construction of a new building. In 2020, the
On December 31, 2019, Joross Company borrowed P3,000,000 and issued a 12%, 3-year note to finance the construction of a new building. In 2020, the company made the following expenditures related to this building.
January1P360,000
June 1600,000
July 11,500,000
December11,500,000
Other debt outstanding and other information follow:
10-year,13% bonds, dated December 31, 2019,
interest payable annuallyP4,000,000
6-year, 10% note, dated December 31, 2019
interest payable annually1,600,000
Interestrevenue earned in 2020 from temporary
investments of the specific borrowing 40,000
Instructions:
1. Determine the amount of interest to be capitalized in 2020.
2. If the specific borrowing amounted to P1,200,000 only (instead of P3,000,000), how much is the capitalized interest in 2020?
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