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What is the correct cost of the building?  ₱ 52,814,548 ₱ 52,000,000 ₱ 52,780,548 ₱ 50,780,548 ₱ 50,000,000

What is the correct cost of the building?  ₱ 52,814,548 ₱ 52,000,000 ₱ 52,780,548 ₱ 50,780,548 ₱ 50,000,000

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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What is the correct cost of the building? 

₱ 52,814,548

₱ 52,000,000

₱ 52,780,548

₱ 50,780,548

₱ 50,000,000

Welders Corporation engaged you for the first time to audit their financial statements as of and for the period ended December 31, 2020. In auditing their PPE, you were able to obtain the balance of their Building account. One of the items under the building account has a cost of P50,000,000, and a related accumulated depreciation of P7,500,000. Based from your investigation, you were able to gather the following information: • Welders decided to construct a new building for their operations, and started the construction on January 2, 2017. The entity finished the construction on December 30, 2017, and occupied the building on January 1, 2018. • Before the construction, the entity obtained a loan on January 1, 2017 specifically to finance the construction of the building. The face value of the loan is P20,000,000, with an interest rate of 10%. The loan is due on December 31, 2021. • On December 31, 2016, the entity had outstanding loans for general purposes. The loans are as follows: o A P30,000,000 loan from PI Bank; 11% interest rate; maturity date is December 31, 2020 o P15,000,000 loan from PN Bank; 8.5% interest rate; maturity date is December 31, 2023 • The schedule of payments made by the entity during the construction are as follows: / January 2 / March 31 / June 30 / July 31 / December 31 • The building has no residual value 9,000,000 8,700,000 4,300,000 24,000,000 4,000,000 Note: Round-off any rates to two decimal places (xx.xx%)
Transcribed Image Text:Welders Corporation engaged you for the first time to audit their financial statements as of and for the period ended December 31, 2020. In auditing their PPE, you were able to obtain the balance of their Building account. One of the items under the building account has a cost of P50,000,000, and a related accumulated depreciation of P7,500,000. Based from your investigation, you were able to gather the following information: • Welders decided to construct a new building for their operations, and started the construction on January 2, 2017. The entity finished the construction on December 30, 2017, and occupied the building on January 1, 2018. • Before the construction, the entity obtained a loan on January 1, 2017 specifically to finance the construction of the building. The face value of the loan is P20,000,000, with an interest rate of 10%. The loan is due on December 31, 2021. • On December 31, 2016, the entity had outstanding loans for general purposes. The loans are as follows: o A P30,000,000 loan from PI Bank; 11% interest rate; maturity date is December 31, 2020 o P15,000,000 loan from PN Bank; 8.5% interest rate; maturity date is December 31, 2023 • The schedule of payments made by the entity during the construction are as follows: / January 2 / March 31 / June 30 / July 31 / December 31 • The building has no residual value 9,000,000 8,700,000 4,300,000 24,000,000 4,000,000 Note: Round-off any rates to two decimal places (xx.xx%)
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