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FINANCIAL ACCOUNTING
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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Current Attempt in Progress In early February 2020, Pina Corp. began construction of an addition to its head office building that is expected to take 18 months to complete. The following 2020 expenditures relate to the addition: Feb. 1 Mar. 1 July 1 Dec. 1 Dec. 31 Payment #1 to contractor Payment to architect Payment #2 to contractor Payment #3 to contractor Asset carrying amount $126,000 27,000 56.900 Amount of interest $ 180,000 $389,900 On February 1, Pina issued a $108,000, three-year note payable at a rate of 10% to finance most of the initial payment to the contractor. No other asset-specific debt was entered into. Details of other interest-bearing debt during the period are provided in the table below: Other Debt Instruments Outstanding-2020 8%, 15-year bonds, issued May 1, 2005, matured May 1, 2020 8%, 10-year bonds, issued June 15, 2014 6%, 12-year bonds, issued May 1, 2020 Principal amount $303,000 $497,000 $303.000 What amount of interest should be capitalized for the fiscal year ending December 31, 2020, according to IAS 23? (Do not round intermediate calculations. Round capitalization rate to 2 decimal places, e.g. 52.75% and final answer to O decimal places, e.g. 5,275.)
Transcribed Image Text:Current Attempt in Progress In early February 2020, Pina Corp. began construction of an addition to its head office building that is expected to take 18 months to complete. The following 2020 expenditures relate to the addition: Feb. 1 Mar. 1 July 1 Dec. 1 Dec. 31 Payment #1 to contractor Payment to architect Payment #2 to contractor Payment #3 to contractor Asset carrying amount $126,000 27,000 56.900 Amount of interest $ 180,000 $389,900 On February 1, Pina issued a $108,000, three-year note payable at a rate of 10% to finance most of the initial payment to the contractor. No other asset-specific debt was entered into. Details of other interest-bearing debt during the period are provided in the table below: Other Debt Instruments Outstanding-2020 8%, 15-year bonds, issued May 1, 2005, matured May 1, 2020 8%, 10-year bonds, issued June 15, 2014 6%, 12-year bonds, issued May 1, 2020 Principal amount $303,000 $497,000 $303.000 What amount of interest should be capitalized for the fiscal year ending December 31, 2020, according to IAS 23? (Do not round intermediate calculations. Round capitalization rate to 2 decimal places, e.g. 52.75% and final answer to O decimal places, e.g. 5,275.)
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