On January 1, 2021, Shangrila Company borrowed P2,000,000 at an interest rate of 12% specifically for the construction of a new building. The actual interest cost on this specific borrowings was P240,000 but interest of P10,000 was earned from the temporary investment of the borrowings proceeds. Shangrila Company also had the following other loans in 2021 which were borrowed for general purposes but the proceeds were used in part for the construction of the building. 10% bank loan – Principal – 3,000,000; Interest – 300,000 12% long term loan – Principal – 5,000,000; Interest – 600,000 The construction began on January 1, 2021 and was completed on December 31, 2021. The expenditures on the construction were P2,000,000 on January 1, P1,000,000 on March 31 and P3,000,000 on September 30. Required: Compute the cost of the new building.
On January 1, 2021, Shangrila Company borrowed P2,000,000 at an interest rate of 12% specifically for the construction of a new building.
The actual interest cost on this specific borrowings was P240,000 but interest of P10,000 was earned from the temporary investment of the borrowings proceeds.
Shangrila Company also had the following other loans in 2021 which were borrowed for general purposes but the proceeds were used in part for the construction of the building.
10% bank loan – Principal – 3,000,000; Interest – 300,000
12% long term loan – Principal – 5,000,000; Interest – 600,000
The construction began on January 1, 2021 and was completed on December 31, 2021. The expenditures on the construction were P2,000,000 on January 1, P1,000,000 on March 31 and P3,000,000 on September 30.
Required:
Compute the cost of the new building.
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