The Queen Manufacturing Company began operating July 1, 2020, the date they completed all factory facilities in place, but the company was incorporated at the beginning of the year. The Land and Building Account at the end of the first year showed the following items; DATE PARTICULARS AMOUNT January 3 Acquisition of Land and Building 1, 108,000 January 15 Property Taxes paid on the real property 20,000 February 5 Option Payments 20,000 February 28 Cost of Removal of the old building 22,000 March 1 Partial payment on new construction to induce the start of 700,000 construction March 1 Legal fees paid 15,000 March 1 Insurance Premium paid for | year 24,000 June 1 Second Payment on new construction 600,000 June 30 General Expenses 60,000 July 1 Final Payment of New Construction 200,000 July 1 Construction Gain 500,000 TOTAL 3,269,00 0 December Depreciation at 1% of the balance (32,690) 31 Carrying Value 3,236,310 The following notes are relevant to consider: a. To acquire the land and building, the company paid P 108,000 cash and 10,000 shares of its 10% preference shares with par value of P 100 per share and with a current selling price of P 120 per share. b. The property taxes paid was for two year, 2019 and 2020. c. P 15,000 from the total option payments were for the property acquired while the balance were for the other real properties not acquired. d. Legal fees covered the following: Cost of Incorporation, P 9,500; Examination of the title covering purchase of land, P 4,000; Legal work in connection with the construction contract, P 1, 500. e. General expenses covered the salaries for the period January 1 to June 30 of the following: President P 20,000 Plant Superintendent while supervising the construction 12,000 Office Staff 28,000 f. The gain on construction is the difference between the total cost of construction and the fair value of the asset upon completion. g. The estimated life of the building is 25 years. 1. The adjusted ending balance of the Land is 2. The adjusted ending balance of the building is 3. The depreciation expense on the building for the year 2020 is PROBLEM 2 CASE1: Naghintay Corporation issued a 5-year, 12 %,P 1,000,000 note on January 1, 2020 to specifically finance the construction of its building from July 1, 2020 and was completed by November 30, 2020. The unused proceeds of the loan were reinvested on a monthly basis all throughout the year to earn 5% annual interest. The following were used from the proceeds of the loan beginning each month. July P 100,000 August 150,000 September 300,000 October 200,000 November 150,000 4. How much is the capitalizable borrowing cost? 5. What is the interest expense to be recognized in 2020? CASE 2: Nagpagawa Corporation contracted Gumagawa Company to construct an P 80,000,000 building on its vacant land for the same purpose. The contract provides Nagpagawa to make five payments where the final payment will be at the date of completion, which is December 31, 2020. The actual payments were made as follows