Your audit client, See Ben Eleven Inc., decided to construct a building on 2020. The construction...
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Your audit client, See Ben Eleven Inc., decided to construct a building on 2020. The construction started on March 1, 2020, and the building was completed by the end of November of 2020. The entity was able to occupy the said structure by the start of December of the same year. In anticipation of the construction, the entity obtained a 3-year loan from PN Bank on January 4, 2020 exclusively for the construction of the new building. The principal amount of the loan is P20,000,000, with stated interest of 10% payable every December 31. See Ben Eleven made the following payments in the construction of the building: Date Amount March 1, 2020 April 30, 2020 July 31, 2020 September 1, 2020 October 1, 2020 November 30, 2020 4,000,000 1,600,000 800,000 11,000,000 1,900,000 500,000 During the year, your audit client reinvested the unused proceeds every start of the month for a 0.75% monthly interest, starting January. The estimated useful life of the building is 20 years with no residual value. The entity used the straight-line method of depreciating the building. Requirements: 1. How much is the capitalizable borrowing cost? 2. How much is the interest income for the year? 3. How much is the interest expense for the year? 4. What is the total initial cost of the building? 5. What is the carrying value of the building as of December 31, 2020? Your audit client, See Ben Eleven Inc., decided to construct a building on 2020. The construction started on March 1, 2020, and the building was completed by the end of November of 2020. The entity was able to occupy the said structure by the start of December of the same year. In anticipation of the construction, the entity obtained a 3-year loan from PN Bank on January 4, 2020 exclusively for the construction of the new building. The principal amount of the loan is P20,000,000, with stated interest of 10% payable every December 31. See Ben Eleven made the following payments in the construction of the building: Date Amount March 1, 2020 April 30, 2020 July 31, 2020 September 1, 2020 October 1, 2020 November 30, 2020 4,000,000 1,600,000 800,000 11,000,000 1,900,000 500,000 During the year, your audit client reinvested the unused proceeds every start of the month for a 0.75% monthly interest, starting January. The estimated useful life of the building is 20 years with no residual value. The entity used the straight-line method of depreciating the building. Requirements: 1. How much is the capitalizable borrowing cost? 2. How much is the interest income for the year? 3. How much is the interest expense for the year? 4. What is the total initial cost of the building? 5. What is the carrying value of the building as of December 31, 2020?
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Answer rating: 100% (QA)
To calculate the answers to the requirements we need to perform several calculations based on the provided information Lets go through each requirement step by step 1 Calculation of Capitalizable Borr... View the full answer
Related Book For
Auditing The Art And Science Of Assurance Engagements
ISBN: 9780136692089
15th Canadian Edition
Authors: Alvin A. Arens, Randal J. Elder, Mark S. Beasley, Chris E. Hogan, Joanne C. Jones
Posted Date:
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