Intermediate Accounting
3rd Edition
ISBN: 9780136912644
Author: Elizabeth A. Gordon; Jana S. Raedy; Alexander J. Sannella
Publisher: Pearson Education (US)
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Question
Chapter 11, Problem 11.6BE
To determine
The amount of interest to be capitalized during the year if the firm is reporting under IFRS.
Given information:
Amount of notes payable issued is $ 2,200,000.
Time period is 2 years.
Interest rate is 8%
Interest income earned is $3,000.
Expenditures are given for the 1st year.
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Students have asked these similar questions
Interest During Construction
Snowbird Company is constructing a building that qualifies for interest capitalization. It is built between January 1 and December 31, 2019. Snowbird made the following
expenditures related to this building:
April 1
$396,000
July 1
400,000
September 1
510,000
December 1 120,000
The company borrowed $500,000 at 12% to help finance the project. In addition, Snowbird had outstanding borrowings of $2 million at 8% and $1 million at 9%.
Required:
1. Compute the amount of interest capitalized related to the construction of the building. Do not round your interim calculations. Round your final answer to the
nearest dollar.
74,750
X
2. Next Level In the current period, the capitalization of interest decreases shareholders' equity
decreases depreciation expense
; in future period the effect of capitalized interest is to
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 – 100,0001 June 20X1 – 300,0001 October 20X1 – 600,000On 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?
On January 1, 20x1, Entity A had the following general borrowings. A part of the proceeds was used to finance the construction of a qualifying asset:
Principal
12% bank loan (1.5 years) ₱ 1,000,000
10% bank loan (3-year) 8,000,000
Expenditures made on the qualifying asset were as follows:
Jan. 1
₱ 5,000,000
March 1
4,000,000
August 31
3,000,000
December 1
2,000,000
Construction was completed on December 31, 20x1.
How much borrowing costs are capitalized to the cost of the constructed qualifying asset?
1,045,000 1,026,667
971,111 920,000
How much is the cost of the qualifying asset on initial recognition?
13,010,000 14,920,000…
Chapter 11 Solutions
Intermediate Accounting
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