Problem 1

On January 1, 2021, ABC Company paid P3,000,000 for a machine. In

relation to this asset, the company received a P500,000 government grant. The
asset will be depreciated in a straight-line basis over 5 years, and the grant will be
treated as deferred income. Because of the violation with requirements, the grant
became completely repayable on January 1, 2023.

Required:
Prepare journal entries for 2021, 2022, and 2023.

Problem 2

XYZ Company borrowed P2,500,000 from BDO Inc specifically to finance the
construction of its building. The proceeds from the borrowing were received on
January 2, 2022 and were supported by a 5-year, 12% note payable. The
construction commenced June 1, 2022 and was substantially completed by October
31, 2022. The unused proceeds from the loan were reinvested on a monthly basis
all throughout the year to earn 5% annual interest. The following were used from
the proceeds of the loan (assume at the beginning of each month):
June P 250,000
July 375,000
August 750,000
September 500,000
October 375,000

Requirements:
1. How much is the capitalizable borrowing cost in 2022?
2. How much is the interest expense to be recognized in 2022?
3. Prepare the entry for 2022.