1. ABC Corporation began construction of its building on January 1, 2021 with estimated cost of P10, 000,000. The construction is expected to end at Dec. 31, 2023. The entity borrowed P10, 000,000, 10% 5-year note dated January 1, 2021 to finance the construction. Both the interest and the principal is payable on December 31, 2023. The first phase of construction is complete, the idle funds were used to as investment and earned P100, 000 investment income.

Required: Compute for the capitalizable borrowing cost on 2021

 

Problem 2

ABC Company began construction of its administration building at an estimated cost of P2,000,000 on January 1,2021. The building was completed on December 31,2021. The entity had the following loans during the year

Rate - Types  - Principal 

10% - General loan - 500,000

12% - Loans payable - 1,500,000

The following expenditure were made during 2021

Date -  Amount

January 1,2021  - 300,000 

July 1,2021-  700,000

November 1,2021 - 600,000

Required: Compute for the capitalizable borrowing cost and the total cost of the building upon completion.

 

Problem 3

On January 1,2021, Sorna Company began construction of a building to be used as its office headquarters. The building was completed on December 31,2021. Expenditure on the project were as follows

January 3,2021 P1,000,000

February 1,2021 1,350,000

March 1,2021 600,000

June 30,2021 800,000

October 1,2021 600,000

On January 1,2021, the entity obtained P3,000,000 loan with 10% interest to fund the construction of the building. The entity has other interest bearing loan amounting to P4,000,000 and P6,000,000 with interest rates of 6% and 8% respectively.

Required: Compute for the capitalizable interest rate and the total cost of the building