Question
On February 1, 2021. Jery Company borrowed P1,000,000 which bears 12% specifically to finance the construction of its qualifying asset. Construction of the building started
On February 1, 2021. Jery Company borrowed P1,000,000 which bears 12% specifically to finance the construction of its qualifying asset. Construction of the building started on September 1, 2021, and continues without interruption until the year-end of December 31, 2021. During the period of construction, the entity incurs directly attributable costs of P100,000 in September and P250,000 in each month from October to December (for simplicity it is assumed that these costs are incurred on the first day of the month). Each month the borrowings, less any amount that is to be expended for the building works in that month are re-invested and earn interest at a rate of 5% per annum. During the year ended December 31, 2021, the entity incurs interest on the P1,000,000 loan totaling P110,000 and earns interest on the re-invested portion of the loan of P37,917. What amount of borrowing costs should Jery capitalized?
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