On January 1, 2021, Hamlet Company borrowed P6,000,000 at an annual interest rate of 10% to finance specifically the cost of building an electricity generating plant. Construction commenced on January 1, 2021 with a cost P6,000,000. Not all the cash borrowed was used immediately, so interest income of P80,000 was generated by temporarily investing some of the borrowed funds prior to use. The project was completed on November 30, 2021. What is the carrying amount of the plant on November 30, 2021?

On January 1, 2021, Hamlet Company borrowed P6,000,000 at an annual interest rate of 10% to finance specifically the cost of building an electricity generating plant. Construction commenced on January 1, 2021 with a cost P6,000,000. Not all the cash borrowed was used immediately, so interest income of P80,000 was generated by temporarily investing some of the borrowed funds prior to use. The project was completed on November 30, 2021. What is the carrying amount of the plant on November 30, 2021?

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

See similar textbooks

Similar questions

NZ Ltd has decided to install a new item of plant, which will cost $500,000. The following alternative financing arrangements are available: Purchasing finance by borrowing Amount borrowed $500,000 Term of loan 5 years Interest rate 9.7% payable annually Lease plan Amount of finance $500,000 Term 5 years True interest rate 9.1% Annual instalments $128,880 Additional information The tax rate is 28%. Assume that tax benefits arising from deductible expenditures are received in the year of the expenditure. NZ Ltd uses the after-tax borrowing rate as a discount rate. Which financing option should NZ Ltd choose? Show your calculations of the cost of each financing option. Use whole numbers when rounding.
2. On Dec 31, 2020 Laf borrowed $3,000,000 at 12% payable annually to finance construction of a new building. In 2021 the company made the following expenditures related to this building: March 1, $360,000; June 1, $600,000; July 1, $1,500,000; Dec 1, $1,500,000. The building was completed on April 30, 2022 Other debt outstanding 10 year, $4,000,000, 13% bond, December 31, 2014, interest payable annually 6 year, 10%, $1,600,000 note dated December 31,2018, interest payable March 1, 2021 an additional expenditure was made towards construction of $150,000 Interest revenue earned in 2021 $49,000 What is the weighted average interest rate of debt other than the specific borrowing loan? (Round of interest rate to nearest whole number, so if you calculated .1412 you would write 14) The firm does not need to use the WAIR rate in calculating capitalized interest in order for it to exist Thank you Brenda
Jules Company started construction of a low-rise building for its own use on January 1, 2021. Upon completion at December 31, 2021, construction costs totaled P21,500,000, which were incurred evenly during the construction period. Prior to the start of construction, Jules Company obtained a P10M, 12%, 5-year loan from ABC Bank to finance the project. During periods that construction costs were low, the company temporarily investment the proceeds and earned interest income of P50,000. In addition to the specific borrowing, prior to the construction, the company had a general borrowing amounting to P600,000 with interest of 15% and a four-year term that was used in part in the self construction?How much is the capitalized interest on the self-constructed building of Jules Company?
Dhapa Rakes
Road Ltd started construction of equipment, a qualifying asset in terms of IAS23 Borrowing costs, for its own use in 2020. Road Ltd finances the construction of the equipment through a general loan that bears interest at 10% per year, compounded annually. No repayments were made on the loan during 2021. R500 000 was incurred on the project during 2020. The following costs were incurred evenly (paid evenly during each month) during the construction of the equipment in 2021: 1 January 2021 - 31 May 2021: R50 000 per month 1 June 2021 - 31 December 2021: R40 000 per month Required Calculate the amount of borrowing costs that should be capitalised to the cost of the equipment for the year ended 31 December 2021.
On January 1, 2023, Marigold Inc. signed a fixed-price contract to have Builder Associates construct a major head office facility a a cost of $4 million. It was estimated that it would take three years to complete the project. Also, on January 1, 2023, to finance the construction cost, Marigold borrowed $4 million that is repayable in 10 annual instalments of $400,000, plus interest at the rate of 10%. During 2023, Marigold made deposit and progress payments totalling $1.5 million under the contract; the weighted average amount of accumulated expenditures was $791,000 for the year. The excess amount of borrowed funds was invested in short-term securities, from which Marigold realized investment income of $24,300. For situation 1, what amount should Marigold report as capitalized borrowing costs at December 31, 2023? (If an answer is zero, please enter O. Do not leave any fields blank.) Capitalized borrowing $ 375700
Coal Company began constructing a building for its own use in January 2023. During 2023, Coal incurred interest of P50,000 on specific construction debt, and P20,000 on other borrowings. Interest computed on the weighted-average amount of accumulated expenditures for the building during 2023 was P40,000. What amount of interest cost should Coal capitalize? a. 20,000 b. 40,000 c. 50,000 d. 70,000
Salmania Co. began working on a project on August 2019, to construct a BD8,250,000 bridge that is expected to be completed in October 2020, at an estimated cost of BD6,000,000. At the end of 2019, the costs to date were BD2,400,000 and the estimated total costs to complete had not changed. The progress billings during 2019 were BD1,600,000 and the cash collected during 2019 was BD1,475,000. Salmania uses the percentage-of-completion method. What amount would be reported in Construction in Process at December 31, 2019?
On February 1, 2021, Arrow Construction Company entered into a three-year construction contract to build a bridge for a price of $8,000,000. During 2021, costs of $2,000,000 were incurred, with estimated costs of $4,000,000 yet to be incurred. Billings of $2,500,000 were sent, and cash collected was $2,250,000. In 2022, costs incurred were $2,500,000 with remaining costs estimated to be $3,600,000. 2022 billings were $2,750,000, and $2,475,000 cash was collected. The project was completed in 2023 after additional costs of $3,800,000 were incurred. The company's fiscal year-end is December 31. This project does not qualify for revenue recognition over time. Required: 1. Calculate the amount of revenue and gross profit or loss to be recognized in each of the three years. 2a. Prepare journal entries for 2021 to record the transactions described (credit "various accounts" for construction costs incurred). 2b. Prepare journal entries for 2022 to record the transactions described (credit…
How much is the Gross Profit/Loss Realized in 2018? Triple Take Construction Co. began construction of a project in 2017 for a contract price of P9,600,000. The project is to be completed in 4 years or in the year 2021. The following are the details regarding the construction project: 2017 2018 2019 Costs incurred to date 2160,000 4,500,000 7,520,000 Estimated cost to complete Progress Billings to date Cash Collections for the year 6,840,000 5,500,000 1,880,000 2304,000 4,320,000 7,680,000 1,728,000 3,240,000 5,760,000
On January 1, 2025, Swifty, Inc. signed a fixed - price contract to have Builder Associates construct a major plant facility at a cost of $4,471,000. It was estimated that it would take 3 years to complete the project. Also on January 1, 2025, to finance the construction cost, Swifty borrowed $4,471,000 payable in 10 annual installments of $447, 100, plus interest at the rate of 10% . During 2025, Swifty made deposits and progress payments totaling $1,676, 625 under the contract; the weighted average amount of accumulated expenditures was $894, 200 for the year. The excess borrowed funds were invested in short-term securities, from which Swifty realized investment income of $265, 300. What amount should Swifty report as capitalized interest at December 31, 2025?