Solomon Company constructed its own office building. The company hada P 1,000,000 two-year 12% loan specifically obtained to finance theasset construction. The construction began on January 1, 2021 and thebuilding was completed on December 31, 2021. Expenditures on thebuilding were made as follows:January 1, 2021 - P 1,600,000April 30, 2021 - P 600,000• November 11, 2021 - P 1,200,000Solomon has the following outstanding general borrowings: BPI at 10%for P 1,500,000 and BDO at 12% for P 2,500,000.QUESTION 1:How much is the borrowing to be capitalized by Solomon Company?P 256,800QUESTION 2:How much is the total finance cost for the year 2021?

As per accounting standard of borrowing cost if general borrowing is used in construction of…

Answered: astructed its own office buildin r 12%…

astructed its own office buildin r 12% loan specifically obtain e construction began on Janua d on December 31, 2021. Exp follows:

Intermediate Accounting: Reporting And Analysis

3rd Edition

ISBN:9781337788281

Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Chapter17: Advanced Issues In Revenue Recognition

Section: Chapter Questions

Problem 9MC

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Concept explainers

Income Statement

Income Statement also commonly called a profit and loss statement, one of the key financial statements (considered together with balance sheet and cash flow statement) which shows the revenues and expenses, as well as the gains and losses of a company for a given period. In other words, it presents the financial performance/profitability of a business over a specified accounting period.

Question

Solomon Company constructed its own office building. The company had
a P 1,000,000 two-year 12% loan specifically obtained to finance the
asset construction. The construction began on January 1, 2021 and the
building was completed on December 31, 2021. Expenditures on the
building were made as follows:
January 1, 2021 - P 1,600,000
April 30, 2021 - P 600,000
• November 11, 2021 - P 1,200,000
Solomon has the following outstanding general borrowings: BPI at 10%
for P 1,500,000 and BDO at 12% for P 2,500,000.
QUESTION 1:
How much is the borrowing to be capitalized by Solomon Company?
P 256,800
QUESTION 2:
How much is the total finance cost for the year 2021?

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