Milott Company had the following borrowings during 2017. The borrowings were made for general purposes but the proceeds were used to finance the construction of a new building. Principal Interest 12% bank loan 3,900,000 468,000 14% long term loan 6,500,000 910,000 The construction began on January 1, 2017 and was completed on Dec. 31, 2017. Expenditures on the building were 2,600,000 on June 30 and 1,300,000 on December 31. Required: Compute the cost of the building
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Milott Company
had the following borrowings during 2017. The borrowings were made for general
purposes but the proceeds were used to finance the construction of a new building.
Principal Interest
12% bank loan 3,900,000 468,000
14% long term loan 6,500,000 910,000
The construction began on January 1, 2017 and was completed on Dec. 31, 2017.
Expenditures on the building were 2,600,000 on June 30 and 1,300,000 on December
31.
Required: Compute the cost of the building
Step by step
Solved in 2 steps
- On January 1, 2017, Sheena Company borrowed 2,800,000 at an interest rate of 12% specifically for the construction of a new building.The actual interest cost on this specific borrowing was 336,000 but interest of 14,000 was earned from the temporary investment of the borrowing proceeds.Sheena company also had the following other loans in 2017 for general purposes but the proceeds were used in part for the construction of the building.Principal Interest10% bank loan 4,200,000 420,00012% long term loan 7,000,000 840,000The construction began on January 1, 2017 and was completed on December 31, 2017. The expenditures on the construction were 2,800,000 on Jan. 1, 1,400,000 on March 31 and 4,200,000 on Sept.30.Required: Compute the cost of the new building.Maragondon Company had the following borrowings during 2018. The borrowings were made for general purposes but the proceeds were used in part to finance the construction of a new building: Principal Interest 12% bank loan 10,000,000 1,200,000 15% long-term loan 20,000,000 3,000,000 30,000,000 4,200,000 The construction began on January 1, 2018 and was completed on December 31, 2018. Expenditures on the building were made as follows:January 1 8,000,000June 30 8,000,000December 31 4,000,000 The capitalizable borrowing cost isa. 1,680,000b. 1,400,000c. 4,200,000d. 1,620,000 What is the solution for the option A?On January 1, 2014, ENERVATE TO WEAKEN Company had the following borrowings made for general purposes and a part of the proceeds was used to finance the construction of a qualifying asset. 12% short-term note-P40,000,000 14% bank loan (3-year)- 72,000,000 16% note payable (5-year)- 88,000,000 The construction of the qualifying asset was started on immediately and completed on June 30, 2015 and expenditures incurred on the qualifying asset were as follows: Jan. 1 P19,200,000 Mar. 31 8,800,000 July 30 14,000,000 March 31 21,600,000 June 30 1,200,000 How much is the cost of the new constructed building?
- On December 31, 2016, Marin Inc. borrowed $3,720,000 at 13% payable annually to finance the construction of a new building. In 2017, the company made the following expenditures related to this building: March 1, $446,400; June 1, $744,000; July 1, $1,860,000; December 1, $1,860,000. The building was completed in February 2018. Additional information is provided as follows. 1. Other debt outstanding 10-year, 14% bond, December 31, 2010, interest payable annually $4,960,0006-year, 11% note, dated December 31, 2014, interest payable annually $1,984,0002. March 1, 2017, expenditure included land costs of $186,000 3. Interest revenue earned in 2017 $60,760 Determine the amount of interest to be capitalized in 2017 in relation to the construction of the building. The amount of interestDuring 2017, Reticulated Company constructed a new manufacturing facility at a cost of P30,000,000. The expenditures for this building, which was finished late in 2017, were incurred evenly during the year. The entity had the following loans outstanding at December 31, 2017. 10% note to finance specifically construction of the manufacturing facility, dated January 1, 2017, P10,000,000. Unpaid as of December 31, 2017. Investments were made on the proceeds from this loan and income of P100,000 was realized in 2017. 12%, 20-years bonds payable issued at face value on April 30, 2016, P30,000,000. 8%, 5-years payable, dated March 1, 2016, P10,000,000. What amount of interest is capitalized as cost of the new building? A. 1,550,000 B. 1,450,000 C. 1,400,000 D. 1,500,000Kobe Company began constructing a building for its own use in February 2017. During 2017, Kobe incurred interest of $70,000 on specific construction debt and $15,000 on other borrowings. Interest computed on the weighted-average amount of accumulated expenditures for the building during 2017 was $60,000. Required: What amount of interest should Kobe capitalize? Prepare the journal entry to record payment of the interest. If interest computed on the weighted-average amount of accumulated expenditures for the building during 2017 was instead $90,000, what amount of interest should Kobe capitalize?
- On December 31, 2016, Headland Inc. borrowed $840,000 at 12% payable annually to finance the construction of a new building. In 2017, the company made the following expenditures related to this building: June 1, $336,000; July 1, $504,000; September 1, $1,008,000; December 1, $504,000. The building was completed in April 2018. Additional information is provided as follows. 1. Other debt outstanding 10-year, 10% bond, dated December 31, 2010, interest payable annually $8,400,000 15-year, 12% note, dated December 31, 2004, interest payable annually $2,100,000 2. Interest revenue earned in 2017 $5,040 Prepare the journal entry to record the capitalization of interest and the recognition of interest expense, if any, at December 31, 2017Jewelry Company had the following outstanding loans during 2017 and 2018.Specific construction loan 3,600,000 10%General loan 30,000,000 12%The entity began the self-construction of a new building on January 1, 2017 and the building was completed on June 30, 2018. The following expenditures were made:January 1, 2017 4,800,000April 1, 2017 6,000,000December 1, 2017 3,600,000March 1, 2018 7,200,000Required: Compute for the cost of the building on December 31, 2017 and on June 30, 2018.Sulo Company had the following borrowings during 2021. The borrowing were made for general purposes but the proceeds were used to finance the construction of new building. 12% bank loan – Principal – 3,000,000; Interest – 360,000 14% long term loan – Principal -5,000,000; Interest – 700,000 The construction began on January 1, 2021 and was completed on December 31, 2021. Expenditures on the building were 2,000,000 on January 1, 2,000,000 on June 30 and 1,000,000 in December 31. Required: Compute the cost of the building.
- During 2017, Egyptian Mau Company construct building costing P18,500,000. The weighted average accumulated expenditures on the building during 2017 totaled P7,800,000. The entity borrowed P4,000,000 at 7% on January 1, 2017. Funds not needed for construction were temporarily invested in short-term securities, and earned P120,000 interest revenue. In addition to the construction loan, the entity had two other notes outstanding during the year, P3,000,000, 10-year, 10% note payable dated October 1, 2015, and a 5-year P2,000,000, 8% note payable dated November 2, 2015. What amount of interest should be capitalized on December 31, 2017? A. 574,000 B. 620,000 C. 509,600 D. 629,600On January 1, 2018, the Highlands Company began construction on a new manufacturing facility for its own use.The building was completed in 2019. The company borrowed $1,500,000 at 8% on January 1 to help finance theconstruction. In addition to the construction loan, Highlands had the following debt outstanding throughout 2018:$5,000,000, 12% bonds$3,000,000, 8% long-term noteConstruction expenditures incurred during 2018 were as follows:January 1 $ 600,000March 31 1,200,000June 30 800,000September 30 600,000December 31 400,000Required:Calculate the amount of interest capitalized for 2018 using the specific interest method.Macy company had the following loans outstanding for the entire year 2017.Specific construction loan 2,000,000 10%General Loan 40,000,000 12%The entity began the self construction of a building on January 1, 2017 and the building was completed on Dec.31, 2017. The following expenditures were made during the current year.January 1 2,000,000July 1 4,000,000November 1 6,000,000Total 12,000,000Required: Compute the cost the new buildin