Question
On January 1, 2018, Richmond Inc. signed a fixed-price contract to have Builders Associates construct a major plant facility at a cost of P4,000,000. It
On January 1, 2018, Richmond Inc. signed a fixed-price contract to have Builders Associates construct a major plant facility at a cost of P4,000,000. It was estimated that it would take three years to complete the project. Also, on January 1, 2015, to finance the construction cost, Richmond borrowed P4,000,000 payable in 10 annual installments of P400,000, plus interest at the rate of 11%. During 2018, Richmond made deposit and progress payments totaling P1,500,000 under the contract. The excess borrowed funds were invested in short-term securities , from which Richmond realized investment income of P250,000. What amount should Richmond report as capitalized interest at December 31, 2018?
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