Answered: Calculate the amount relating to…

Business

Accounting

Calculate the amount relating to borrowing cost that should be capitalized in the cost of the building?

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Question

ABC begins the construction of a building on 1 January 20X1. The following expenditures on this property incurred during the year 20X1: (Unit: CU 1000)
1 January 20X1 – 100,000
1 June 20X1 – 300,000
1 October 20X1 – 600,000
On 1 January 20X1, Entity A had 500,000 of general borrowings which increased by 1 million to 1.5 million in total on 1 June 20X1. Interest expense on these borrowings calculated to 50,000 for full-year 20X1.
Calculate the amount relating to borrowing cost that should be capitalized in the cost of the building?

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