Company A started work on the construction of its headquarters at the beginning of January 1, 2020. In order to finance expenses related to this project, the company took out a construction loan with Bank B with details as follows:

Non-interest bearing note with the principal payable at the end of 2 years          10,000,000

Implicit interest rate was determined to be 8%.

Construction expenses in 2020 amounted to P6,500,000, while expenses in 2021 amounted to P2,000,000 until its completion in the end of August.

In May 1, 2020, a portion of the loan was briefly put by the company in a 6-month time deposit with Bank C, accruing interest of P150,000.

The note was paid upon maturity.

Use a PV factor of 4 decimal points.

Round final answers to nearest peso.

Determine:

Amount of capitalizable borrowing costs in 2020
Balance of the Building account in the statement of financial position as of December 31, 2021, assuming no depreciation is taken on the first year of use.

Answer rating: 100% (QA)

To determine the amount of capitalizable borrowing costs in 2020 we need to calculate the interest e... View the full answer