Sun Company was constructing an asset that qualified for interest capitalization. The construction began at the beginning of the current year and was completed at the end of current year. The construction cost totaled P12,000,000 and was incurred evenly during the current year. The average expenditures on the asset totaled P6,000,000. The entity had outstanding notes payable during the entire year of construction comprising P6,000,000 8% interest and P9,000,000 9% interest. None of the borrowings were specified for the construction of the qualifying asset. 1. What amount of interest should be capitalized? a. 480,000 b. 516,000 c. 810,000 d. 960,000 2. What is the interest expense for the current year? a. 960,000 b. 645,000 c. 774,000 d.

Sun Company was constructing an asset that qualified for interest capitalization. The construction began at the beginning of the current year and was completed at the end of current year. The construction cost totaled P12,000,000 and was incurred evenly during the current year. The average expenditures on the asset totaled P6,000,000. The entity had outstanding notes payable during the entire year of construction comprising P6,000,000 8% interest and P9,000,000 9% interest. None of the borrowings were specified for the construction of the qualifying asset. 1. What amount of interest should be capitalized? a. 480,000 b. 516,000 c. 810,000 d. 960,000 2. What is the interest expense for the current year? a. 960,000 b. 645,000 c. 774,000 d.

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

Chapter18: Accounting For Income Taxes

Section: Chapter Questions

Problem 5RE: Turnip Company purchased an asset at a cost of 10,000 with a 10-year life during the current year....

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