Professional Documents
Culture Documents
Miller Corporation is planning to build a new factory site for its provincial operations in the
southwest part of the country. Of all the contractors who submitted their bids regarding the
proposed building, the company chose Pfeifer Construction Inc. to build its factory site. On
November 1, 2014, the contract was signed by miller and Pfeifer to construct a building as
their future factory site in a land costing P 1,000,000 (the land was purchased from the
contractor and included in first payment). Miller made the following payments to the
construction company during 2015:
01-January 2,100,000
01-March 3,000,000
01-May 5,400,000
31-December 4,500,000
Total 15,000,000
Pfeifer Construction Inc. completed the building, ready for occupancy, on December 31,
2015. Miller Corporation secured and used the following borrowings in order to finance the
construction of the factory site:
Other Debt
2. 10%, 5-year note payable in the amount of P 5,500,000, dated December 31, 2011,
with interest payable annually every December 31.
3. 12%, 10-year bonds issued December 31, 2010, in the amount of P 6,000,000, with
interest payable annually every December 31.
Miller Corporation opened its factory site to the public on January 31, 2016 and hosted a
grand opening party. The entity spent P 200,000 in organizing the whole day event in which
the expenses came from the investment income proceeds of P 300,000 from the note
payable dated December 31, 2011. The factory site started its operations, the next day,
February 1, 2016.
REQUIREMENT:
1. Cost of the factory site.
2. Cost of the Land
3. Capitalizable borrowing cost for the year 2015
4. Interest expense for 2015