Situation 1 The entity had borrowings on January 1, 2020. Borrowings ware made from general purposes but the proceed were used in part to finance the construction of a new building. The borrowings consisted of a P10,000,000 bank loan with 12% interest and another P20,000,000 long-term loan with 15% interest unpaid on December 31, 2020. The construction began on January 1, 2020 and was completed on September 30, 2020. Expenditures on the building were: January 1 5,000,000 June 30 6,000,000 August 30 1,800,000 Situation 2 On January 1, 2020, an entity has decided to expand its operation and has purchased land and an old building for construction of a new manufacturing plant. The following costs were incurred in purchasing the property and constructing the new building: Purchase price (the old building has no fair value) 3,500,000 Payment of property taxes on the land for 2019 and 2020 (equally for each year) 200,000 Title search for insurance 60,000 Special assessment for city improvements on water and sewer Building permit Cost to destroy existing building on land Contract cost of a new building 250,000 50,000 80,000 8,000,000 Architect fee 300,000 Sidewalk and parking lot part of the building plan 100,000

Situation 1 The entity had borrowings on January 1, 2020. Borrowings ware made from general purposes but the proceed were used in part to finance the construction of a new building. The borrowings consisted of a P10,000,000 bank loan with 12% interest and another P20,000,000 long-term loan with 15% interest unpaid on December 31, 2020. The construction began on January 1, 2020 and was completed on September 30, 2020. Expenditures on the building were: January 1 5,000,000 June 30 6,000,000 August 30 1,800,000 Situation 2 On January 1, 2020, an entity has decided to expand its operation and has purchased land and an old building for construction of a new manufacturing plant. The following costs were incurred in purchasing the property and constructing the new building: Purchase price (the old building has no fair value) 3,500,000 Payment of property taxes on the land for 2019 and 2020 (equally for each year) 200,000 Title search for insurance 60,000 Special assessment for city improvements on water and sewer Building permit Cost to destroy existing building on land Contract cost of a new building 250,000 50,000 80,000 8,000,000 Architect fee 300,000 Sidewalk and parking lot part of the building plan 100,000

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

Chapter14: Financing Liabilities: Bonds And Long-term Notes Payable

Section: Chapter Questions

Problem 13C

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