ABC Company had the following general borrowings during 2011 which were used to finance the construction of the entity's new building. Principal Borrowing Cost 10% Bank loan 2,800,000.00 280,000.00 10% short term loan 1,600,000.00 160,000.00 12% long term loan 2,000,000.00 240,000.00 6,400,000.00 680,000.00 The construction began on January 1, 2011 and the building was completed on December 31, 2011. In the first phase of the construction there were idle funds which the entity invested and earned interest income of P62,500. Expenditures on the building were made as follows: 1-Jan 400,000.00 31-Mar 1,000,000.00 30-Jun 1,200,000.00 30-Sep 1,000,000.00 31-Dec 400,000.00

ABC Company had the following general borrowings during 2011 which were used to finance the construction of the entity's new building. Principal Borrowing Cost 10% Bank loan 2,800,000.00 280,000.00 10% short term loan 1,600,000.00 160,000.00 12% long term loan 2,000,000.00 240,000.00 6,400,000.00 680,000.00 The construction began on January 1, 2011 and the building was completed on December 31, 2011. In the first phase of the construction there were idle funds which the entity invested and earned interest income of P62,500. Expenditures on the building were made as follows: 1-Jan 400,000.00 31-Mar 1,000,000.00 30-Jun 1,200,000.00 30-Sep 1,000,000.00 31-Dec 400,000.00

Financial Reporting, Financial Statement Analysis and Valuation

8th Edition

ISBN:9781285190907

Author:James M. Wahlen, Stephen P. Baginski, Mark Bradshaw

Publisher:James M. Wahlen, Stephen P. Baginski, Mark Bradshaw

Chapter9: Operating Activities

Section: Chapter Questions

Problem 18PC

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Question

What is the amount of capitalizable borrowing cost?

A. 680,000

B. 150,000

C. 212,500

D. 425,000

ABC Company had the following general borrowings during 2011 which were used to finance the
construction of the entity's new building.
Principal
Borrowing Cost
10% Bank loan
2,800,000.00
280,000.00
10% short term loan
1,600,000.00
160,000.00
12% long term loan
2,000,000.00
240,000.00
6,400,000.00
680,000.00
The construction began on January 1, 2011 and the building was completed on December 31,
2011. In the first phase of the construction there were idle funds which the entity invested and
earned interest income of P62,500. Expenditures on the building were made as follows:
1-Jan
400,000.00
31-Mar
1,000,000.00
30-Jun
1,200,000.00
30-Sep
1,000,000.00
31-Dec
400,000.00

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This topic is about borrowing costs. Please choose the letter of the correct answer.
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This topic is about borrowing costs. Please choose the letter of the correct answer.