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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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