Problem 6 and 7

Problem 25-6 (AICPA Adapted) Chum Company started construction of a new office building on January 1, 2020 and moved into the finished building on July 1, 2021. Of the P25,000,000 total cost of the building, P20,000,000 was incurred in 2020 evenly throughout the year. The entity's incremental borrowing rate was 12% throughout P1,020,000. 2020, and the total amount of interest incurred was What amount should be reported as capitalized interest on December 31, 2020? a. 1,020,000 b. 1,200,000 C. 1,500,000 d. 2,400,000 Problem 25-7 (PHILCPA Adapted) Marauder Company borrowed P15,000,000 at 12% to finance in part the construction of a new building on January 1, 2020 and in part for general purposes. The loan is to be repaid commencing the month following completion of the building. Expenditures for the completed structure totaled P10,000,000 during the year ended December 31, 2020. These expenditures were incurred evenly throughout the year. The entity earned interest of P200,000 for the year on the unexpended portion of the loan. 1. What amount of interest is capitalized on December 31, 2020? a. 1,200,000 b. 1,000,000 C. 600,000 400,000 2. What is the interest expense for 2020? a. 1,800,000 b. 1, 200,000 C. 1, 600,000 d. 1,000,000