Question
Pathao is constructing a new building and in order to finance that construction, Pathao borrows $2,000,000 at an interest rate of 10 percent per year
Pathao is constructing a new building and in order to finance that construction,
Pathao borrows $2,000,000 at an interest rate of 10 percent per year on 1 January 2018. The
building will have a useful life of 30 years and salvage value of $20,000. Construction is completed
after two years, during which time the company earns $50,000 by temporarily investing the loan
proceeds.
a. What is the total amount of interest that will be capitalized under IFRS during the construction
period?
b. What is the total amount of interest that will be capitalized under US GAAP during the
construction period?
c. What will the yearly depreciation expense of this building when the building is complete, under
straight-line method
d. What will the depreciation rate be after construction is completed using the accelerated
method?
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