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Interest Capitalization and Expense Analysis

ANA Corp contracted Nat Inc to construct a building for ₱80 million that was completed on December 31, 2014. Pan Corp made 5 payments in 2015 totaling ₱93 million for the construction. ANA Corp took out loans including a ₱34 million 12% loan on January 1, 2015 for the building and two other loans for general financing purposes.

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26 views1 page

Interest Capitalization and Expense Analysis

ANA Corp contracted Nat Inc to construct a building for ₱80 million that was completed on December 31, 2014. Pan Corp made 5 payments in 2015 totaling ₱93 million for the construction. ANA Corp took out loans including a ₱34 million 12% loan on January 1, 2015 for the building and two other loans for general financing purposes.

Uploaded by

leshz zyn
Copyright
© All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as DOCX, PDF, TXT or read online on Scribd

Problem 1

ANA Corp. contracted Nat Inc. on January 1, 2015 to construct building for ₱80,000,000 on
land Pan Corp. purchased a couple of years back. The contract provides that Pan Corp. is to
make five payments in 2014, with the last payment to be made upon completion. The
building was completed on December 31, 2014.
Pan Corp. made the following payments during 2015:
January 1 ₱8,000,000
April 1 19,000,000
July 31 24,400,000
October 1 27,600,000
December 31 14,000,000

ANA Corp. made the following arrangements with financing companies in 2014:
 12%, ₱34M loan dated January 1, 2015, with interest compounded quarterly. Both
principal and interest are payable on December 31, 2018. This loan related
specifically to the building project.
 10%, 10-year, ₱24M note dated December 31, 2014, with simple interest; interest
payable annually on December 31. The loan was for general financing purposes
including the partial financing of the construction.
 12%, 5-year. ₱28M note dated December 31, 2014, with simple interest; interest
payable annually on December 31. The loan was for general financing purposes
including the partial financing of the construction.

Questions:

1. The amount of interest to be capitalized in 2015?


2. The amount of interest to be expense in 2015?

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