On January 1, 2021, Gemini Company contracted with a contractor to construct a building for P20,000,000. The entity is required to make five payments in 2021 with the last payment scheduled on the date of completion. The building was completed on December 31, 2021. The entity made the following payments during 2021: January 1 - 2,000,000 March 31 - 4,000,000 June 30 - 6,100,000 September 30 - 4,400,000 December 31 - 3,500,000 The entity had the following debt outstanding on December 31, 2021: 12% 4-year note dated January 1, 2021, with interest compounded quarterly, both principal and interest due December 31, 2024, relating specifically to the building project. The future value of 1 at 3% for 4 periods is 1.1255 - 8,500,000 10% 10-year note dated December 31, 2020 with simple interest payable annually on December 31 - 6,000,000 12% 5-year note dated December 31, 2019 with simple interest payable annually on December 31 - 7,000,000. Required: Determine the average expenditures on the building. Determine the capitalizable borrowing cost. Determine the total cost of the building on December 31, 2021.
On January 1, 2021, Gemini Company contracted with a contractor to construct a building for P20,000,000. The entity is required to make five payments in 2021 with the last payment scheduled on the date of completion. The building was completed on December 31, 2021. The entity made the following payments during 2021: January 1 - 2,000,000 March 31 - 4,000,000 June 30 - 6,100,000 September 30 - 4,400,000 December 31 - 3,500,000 The entity had the following debt outstanding on December 31, 2021: 12% 4-year note dated January 1, 2021, with interest compounded quarterly, both principal and interest due December 31, 2024, relating specifically to the building project. The future value of 1 at 3% for 4 periods is 1.1255 - 8,500,000 10% 10-year note dated December 31, 2020 with simple interest payable annually on December 31 - 6,000,000 12% 5-year note dated December 31, 2019 with simple interest payable annually on December 31 - 7,000,000. Required: Determine the average expenditures on the building. Determine the capitalizable borrowing cost. Determine the total cost of the building on December 31, 2021.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question
On January 1, 2021, Gemini Company contracted with a contractor to construct a building for P20,000,000.
The entity is required to make five payments in 2021 with the last payment scheduled on the date of completion.
The building was completed on December 31, 2021. The entity made the following payments during 2021:
January 1 - 2,000,000
March 31 - 4,000,000
June 30 - 6,100,000
September 30 - 4,400,000
December 31 - 3,500,000
The entity had the following debt outstanding on December 31, 2021:
- 12% 4-year note dated January 1, 2021, with interest compounded quarterly, both principal and interest due December 31, 2024, relating specifically to the building project. The future value of 1 at 3% for 4 periods is 1.1255 - 8,500,000
- 10% 10-year note dated December 31, 2020 with simple interest payable annually on December 31 - 6,000,000
- 12% 5-year note dated December 31, 2019 with simple interest payable annually on December 31 - 7,000,000.
Required:
- Determine the average expenditures on the building.
- Determine the capitalizable borrowing cost.
- Determine the total cost of the building on December 31, 2021.
- Compute the interest expense for 2021.
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