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Borrowing Cost: Intermediate Accounting 2 Sample Questions
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Problem 25-4 (IAA)
Molave Company had the following outstanding loans during
2021 and 2022.
Specific construction loan 3,000,000 10%
General loan 25,000,000 12%
The entity began the self-construction of a new building on
January 1, 2021 and the building was completed on June 30,
2022. The following expenditures were made:
January 1, 2021 4,000,000
April 1, 2021 5,000,000
December 1, 2021 3,000,000
March 1, 2022 6,000,000
Required:
1. Compute the cost of the new building on December 31,
2021 and June 30, 2022.
2. Compute the interest expense for 2021 and 2022.
Scanned with CamScanner problem 25-22 (IAA)
1, 2021, Circus ©
on June I, ran S Company began .
new manwfacr sane plant, The plant eter n
October 31, - Expenditures on the priced ets on
jy 1, 2021
5,000,000
tober 1, ,
ae i 4,000,000
ebruary 1, 2 3,000,000
; 000,
April ’ 2
September 1 Aes
October 1, 2022 "500,000
On July 1, 2021, the enti
construction loan with a 6% in,
on December 31, 2022.
ty obtained a P7,000,000
terest rate. The loan was paid
The only other interest-bearing debt was a long-term note
for P15,000,000 with an interest rate of 9%.
This note was outstanding during 2021 and 2022. The fiscal
year-end is December 31.
1. What amount of interest should be capitalized in 2021?
a. 270,000
b. 210,000
c. 540,000
d. 420,000
2. What amount of interest should be capitalized in 2022?
a. 1,000,000
b. 1,350,000
c. 250,000
4. 857,000
3. What amount should be reported as interest expense
for 2022?
a. 1,350,000
b. 1,770,000
c. 913,000
a. 420,000 :
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