Problem 12 and 13

Problem 25-12 (IAA) During 2020, Israel Company constructed asset costing P4,215,000. The weighted average accumulated expenditures on the asset during the current year amounted to P3,900,006 The entity borrowed P2,000,000 at 7.5% on January 1, 2020 Funds not needed for construction were temporarily invested in short-term securities and earned P59,000 in interest revenue. In addition to the construction loan, the entity had two other notes outstanding during the year, a P1,500,000. 10-year, 10% note payable dated October 1, 2019, and a P1,000,000. 8%% note payable dated November 2, 2019. What amount of interest should be capitalized during 2020? a. 324,800 b. 297,500 C. 273,000 d. 265,800 Problem 25-13 (IFRS) Demure Company commenced construction of a new plant on February 1, 2020. The cost of P18,000,000 was paid in full to the contractor on February 1, 2020 and was funded from existing general borrowings. The construction was completed on September 30, 2020. The borrowings outstanding during the current year comprised: Bank A - 6% Bank B - 6.6% 8,000,000 Bank C - 7% 10,000,000 30,000,000 1. What amount of borrowing cost should be capitalized? a. 1,215,000 b. 2,100,000 C. 3,240,000 d. 810,000 2. What is the interest expense for the current year? a. 2,430,000 b. 3,240,000 c. 2,160,000 d. 1,350,000