.

The company obtained a loan for P5,000,000 at an interest rate of 10%, Specifically for the

construction of the building. Availments from the loan were made at the beginning of each

quarter in equal amounts. Prior to their disbursement, the proceeds of the loan were

temporarily invested and earned interest income amounting to P40,000.

What is the total cost of the building constructed?

c. On January 1, 2019, Metro Co. borrowed P1,800,000 at an interest rate of 10% specifically for

the construction of its new building. Interest earned from the temporary investment of the

proceeds of the loan prior to their disbursement amounted to P10,000. Metro Co. also had the

following other loans in 2019 which were borrowed for general purposes. The proceeds of

these loans were used in part for the construction of the building.

10%, 2-year note -P1,600,000

12%, 5-year note -P2,000,000

How much is the capitalized interest?

d. Metro Co. had the following general borrowings during 2019 which were used to finance the

construction of the company’s new building.

10% bank loan -P2,800,000

10% short-term note - 1,600,000

12% long-term loan - 2,000,000

How much should be recorded as interest expense for the year 2019?

13. On December 31, 2018, Lim Company borrowed P30,000,000 and issued a 12%, 3-year note

to finance the construction of a new building. During 2019, the company made the following

expenditures related to this building:

January 1 P3,600,000 July 1 P15,000,000

June 1 6,000,000 December 1 15,000,000

The construction was completed on December 31, 2019.

Other debts outstanding and other information follow:

10-year, 13% bonds, dated December 31, 2017,

Interest payable annually P40,000,000

6-year, 10% note, dated December 31, 2018, 16,000,000

Interest payable annually

Interest revenue earned in 2019 from temporary 249,000

Investments of the specific borrowing

REQUIRED:

(a) Determine the amount of interest to be capitalized in 2019.

(b) If the specific borrowing amounted to P12,000,000 only

(instead of P30,000,000), how much is the capitalized interest in 2019?