Intermediate Accounting
1st Edition
ISBN: 9780132162302
Author: Elizabeth A. Gordon, Jana S. Raedy, Alexander J. Sannella
Publisher: PEARSON
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Question
Chapter 11, Problem 11.6BE
To determine
The amount of interest to be capitalized during the year if the firm is reporting under IFRS.
Given information:
Amount of notes payable issued is $ 2,200,000.
Time period is 2 years.
Interest rate is 8%
Interest income earned is $3,000.
Expenditures are given for the 1st year.
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Students have asked these similar questions
ABC begins the construction of a building on 1 January 20X1. The following expenditures on this property incurred during the year 20X1: (Unit: CU 1000)1 January 20X1 – 100,0001 June 20X1 – 300,0001 October 20X1 – 600,000On 1 January 20X1, Entity A had 500,000 of general borrowings which increased by 1 million to 1.5 million in total on 1 June 20X1. Interest expense on these borrowings calculated to 50,000 for full-year 20X1.Calculate the amount relating to borrowing cost that should be capitalized in the cost of the building?
interest During Construction
Sunfish Company is constructing a building that qualifies for interest capitalization. It is build between January 1 and
December 31, 2021. Sunfish made the following expenditures related to this building:
370,000
1-May $
1-Jun 5 410,000
1-Aug $
1-Dec $
500,000
130,000
The company borrowed $550,000 at 11% to help finance the project. In addition, Sunfish had outstanding borrowings of $2 million at
7% and $1 million at 8%.
Required:
1 Compute the amount of interest to be capitalized related to the construction of the building.
2 Next Level: What effect does the interest capitalization have on the company's financial statements after it completes the building?
On January 1, 20x1, Entity A had the following general borrowings. A part of the proceeds was used to finance the construction of a qualifying asset:
Principal
12% bank loan (1.5 years) ₱ 1,000,000
10% bank loan (3-year) 8,000,000
Expenditures made on the qualifying asset were as follows:
Jan. 1
₱ 5,000,000
March 1
4,000,000
August 31
3,000,000
December 1
2,000,000
Construction was completed on December 31, 20x1.
How much borrowing costs are capitalized to the cost of the constructed qualifying asset?
1,045,000 1,026,667
971,111 920,000
How much is the cost of the qualifying asset on initial recognition?
13,010,000 14,920,000…
Chapter 11 Solutions
Intermediate Accounting
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