5. KLM had the following loans in place at the beginning andend of 20X1:31 December 20X11 January 20X1DescriptionBank loan, 6% p.a.Bank loan, 8% p.a.Debenture stock, 5.5% p.a.130,00050,000200,000130,00050,000The bank loan at 6% p.a. was taken in July 20X1 to finance theconstruction of a new production hall (construction began on1 March 20X1).The bank loan at 8% p.a. and debenture stock were taken forgeneral purposes, one of which is to finance the constructionof a new machinery.KLM used P60,000 for the construction of the machinery on 1February 20X1 and P25,000 on 1 September 20X1.Requirement: What borrowing cost should be capitalized for thenew machinery?Adapted)

Specific borrowings are loans that are specifically borrowed for the construction or acquisition of…

5. KLM had the following loans in place at the beginning and end of 20X1: 31 December 20X1 1 January 20X1 Description Bank loan, 6% p.a. Bank loan, 8% p.a. 130,000 50,000 200,000 130,000 50,000 Debenture stock, 5.5% p.a. The bank loan at 6% p.a. was taken in July 20X1 to finance the

5. KLM had the following loans in place at the beginning and end of 20X1: 31 December 20X1 1 January 20X1 Description Bank loan, 6% p.a. Bank loan, 8% p.a. 130,000 50,000 200,000 130,000 50,000 Debenture stock, 5.5% p.a. The bank loan at 6% p.a. was taken in July 20X1 to finance the

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Question

5. KLM had the following loans in place at the beginning and
end of 20X1:
31 December 20X1
1 January 20X1
Description
Bank loan, 6% p.a.
Bank loan, 8% p.a.
Debenture stock, 5.5% p.a.
130,000
50,000
200,000
130,000
50,000
The bank loan at 6% p.a. was taken in July 20X1 to finance the
construction of a new production hall (construction began on
1 March 20X1).
The bank loan at 8% p.a. and debenture stock were taken for
general purposes, one of which is to finance the construction
of a new machinery.
KLM used P60,000 for the construction of the machinery on 1
February 20X1 and P25,000 on 1 September 20X1.
Requirement: What borrowing cost should be capitalized for the
new machinery?
Adapted)

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