Supernova Corporation borrowed P1,000,000 from BPI Inc. specifically to finance the construction of tis building. The proceeds from the borrowing were received on January 2, 2014 and were supported by a 5 year, 12% note payable. The construction commenced on July 1, 2014 and was substantially competed by November 30, 2014. The unused proceeds from the loan were reinvested on a monthly basis all throughout the year to earn 5% annual interest. The following were used form the proceeds of the loan (assume at the beginning of each months). July 100,000 August 150,000 September 300,000 October 200,000 November 150,000 QUESTIONS: 11) What is the capitalizable borrowing cost? A. 120,000 C. 50,000 B. 109,792 D. 39,792 12) What is the total interest expense to be recognized for 2014? A. 120,000 C. 50,000 B. 70,000 D. 10,000
Supernova Corporation borrowed P1,000,000 from BPI Inc. specifically to finance the construction of tis
building. The proceeds from the borrowing were received on January 2, 2014 and were supported by a 5 year,
12% note payable. The construction commenced on July 1, 2014 and was substantially competed by
November 30, 2014. The unused proceeds from the loan were reinvested on a monthly basis all throughout
the year to earn 5% annual interest. The following were used form the proceeds of the loan (assume at the
beginning of each months).
July 100,000
August 150,000
September 300,000
October 200,000
November 150,000
QUESTIONS: 11) What is the capitalizable borrowing cost?
A. 120,000 C. 50,000
B. 109,792 D. 39,792
12) What is the total interest expense to be recognized for 2014?
A. 120,000 C. 50,000
B. 70,000 D. 10,000
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