The third year of a construction project of SMDC began with a P3,000,000 balance in construction in progress. Included in that figure is P500,000 of interest capitalized in the first two years. Construction expenditures during the third year were P10,000,000 which were incurred evenly throughout the entire year. The entity had P30,000,000 in interest bearing debt outstanding in the third year at an interest rate of 9%. What amount of interest for the third year is capitalized as cost of the construction project? A . 900,000 B. 450,000 C. 720,000 D. 675,000
The third year of a construction project of SMDC began with a P3,000,000 balance in construction in
progress. Included in that figure is P500,000 of interest capitalized in the first two years. Construction
expenditures during the third year were P10,000,000 which were incurred evenly throughout the entire
year. The entity had P30,000,000 in interest bearing debt outstanding in the third year at an interest rate of
9%. What amount of interest for the third year is capitalized as cost of the construction project?
A
.
900,000 B. 450,000 C. 720,000 D. 675,000
1) On January 1, 2022 Minito Corporation construction of homes for those families that were hit by the
tsunami disaster and were homeless. The contraction expected to take 3.5 years. It is being financed by
issuance of bonds for P7,000,000 at 12% per annum. The bonds were issued at the beginning of the
construction. The bonds carry a 1.5% issuance cost. The project is also financed by issuance of P3 million
share capital with a 14% cost of capital. The borrowing costs to be capitalized in 2022 is (use
amortization method
A
.
870,000 B. 840,000 C. 1,290,000 D. 1,260,000
Jen Company had a 10% P3,000,000 specific construction loan and 12% P25,000,000 general loan outstanding
during 2021 and 2022. The entity began the self-construction of a building on January 1, 2021 and was
completed on December 31, 2022. The following expenditures were made during 2021 and 2022:
January 1, 2021 4,000,000
April 1, 2021 5,000,000
December 1, 2021 3,000,000
March 1, 2022 6,000,000
1) What is the cost of the building on December 31, 2022?
A
.
18,000,000 B. 20,988,000 C. 19,980,000 D. 20,100,000
2) What amount of interest expense should be reported for 2022?
A
.
3,000,000 B. 3,300,000 C. 1,212,000 D. 912,000
3) During 2017, Reticulated Company constructed a new manufacturing facility at a cost of P30,000,000. The
expenditures for this building, which was finished late in 2017, were incurred evenly during the year. The
entity had the following loans outstanding at December 31, 2017.
10% note to finance specifically construction of the manufacturing facility, dated January 1, 2017,
P10,000,000. Unpaid as of December 31, 2017. Investments were made on the proceeds from this loan
and income of P100,000 was realized in 2017. 12%, 20-years bonds payable issued at face value on April 30, 2016, P30,000,000.
8%, 5-years payable, dated March 1, 2016, P10,000,000.
What amount of interest is capitalized as cost of the new building?
A
.
1,550,000 B. 1,450,000 C. 1,400,000 D. 1,500,000
Arcana Company self-constructed an asset for its own use. Construction stated on January 1, 2017 and the
asset was completed on December 31, 2017. The company had a two-year, 18% loan of P500,000, specifically
obtained to finance the asset construction. Funds not yet needed during the construction were temporarily
invested in a short-term debt securities yielding a P10,000 interest revenue. Costs incurred during the year
were as follows:
January 1 – P400,000 April 1 – P500,000
August 1 – P480,000 December 1 – P180,000
1) What is the capitalized interest added to the cost of the self-constructed asset?
A
.
90,000 B. 80,000 C. 180,000 D. 0
2) How much is the total cost of the self-constructed asset?
A
.
1,650,000 B. 1,560,000 C. 1,640,000 D. 1,070,000
Aries Company started construction on a building on January 1 of this year and completed
construction on December 31 of the same year. Aries had only two interest notes outstanding during the
year, and both of these notes were outstanding for all 12 months of the year. The following information is
available:
Average accumulated expenditures P 250,000
Ending balance in construction in progress before capitalization of interest 360,000
6% note incurred specifically for the project (all disbursed on Jan. 1) 150,000
9% long-term note 500,000
What amount of interest should Aries capitalize for the current year?
A
.
15,000 B. 18,000 C. 22,500 D. 27,900
1) During 2020, Grant Industries, Inc. constructed a new manufacturing facility at a cost of P12,000,000. The
weighted average accumulated expenditures for 2020 were calculated to be P5,400,000. The company had
the following debt outstanding at December 31, 2020:
10 percent, five-year note to finance construction of the manufacturing facility, dated January 1, 2020,
P3,600,000.
12 percent, 20-year bonds issued at par on April 30, 2016, P8,400,000. 8 percent, six-year note payable, dated March 1, 2019, P1,800,000.
Determine the amount of interest to be capitalized by Grant Industries for 2020.
A
.
360,000 B. 563,220 C. 557,280 D. 591,840
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