During 2020, Israel Company constructed asset costing P4,215,000. The weighted average accumulated expenditures on the asset during the current year amounted to P3,900,000. 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.
During 2020, Israel Company constructed asset costing P4,215,000. The weighted average accumulated expenditures on the asset during the current year amounted to P3,900,000. 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.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question
Requirements:
- Compute the capitalizable borrowing cost on 2020
- Compute the total cost of the building on 2020
- Compute the interest expense on 2020
![During 2020, Israel Company constructed asset costing
P4,215,000. The weighted average accumulated expenditures
on the asset during the current year amounted to P3,900,000.
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.](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F4ba13445-9e36-4ecb-b50e-2c7d4f8be5b2%2F1437920c-ff20-4a9b-9776-e132a5a0b7d1%2Fk3jaf4h_processed.jpeg&w=3840&q=75)
Transcribed Image Text:During 2020, Israel Company constructed asset costing
P4,215,000. The weighted average accumulated expenditures
on the asset during the current year amounted to P3,900,000.
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.
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