Company A signed an agreement with a contractor to have a production facility built. The constructionstarted on 01/01/2025 and continued until 08/31/2026. Company A borrowed a bank loan to be used infinancing of the construction. The following information on Company A's bank loans is available:Annual InterestDate Borrowed Amount ($)TermRateSpecific Construction01/01/2025850,00010 percent2 yearsLoanOther LoanOther Loan08/10/2024450,00012 percent3 years11/05/2023750,00013 percent5 yearsCompany A incurred the following costs during 2025:Expenditure Date Expenditure Amount ($)01/01/202503/01/202507/01/202512/31/2025600,000720,000540,000330,000The amount of interest cost to be capitalized in 2025 is approximately:$160,027O $155,626O $163,275$152,215

To calculate the amount of interest cost to be capitalized in 2025, we need to consider the timing…

Answered: Company A signed an agreement with a…

Intermediate Accounting: Reporting And Analysis

3rd Edition

ISBN:9781337788281

Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Chapter10: Property, Plant And Equipment: Acquisition And Subsequent Investments

Section: Chapter Questions

Problem 10RE

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On January 1, 2019, Q Co. contracted for the construction of a building for 20,000,000 on land that it had previously purchased. The building was completed on December 31, 2019. The following payments were made to the contractor: Payment date AmountJanuary 1. 2,000,000March 1. 6,000,000August 30. 10,000,000December 1. 2,000,000 The following represents the borrowings of Q Co. as of December 31, 2019:• 10%, 7,000,000, 4-year note dated January 1, 2019 with simple interest payable annually, specifically borrowed to finance the construction project. Interest income earned on the temporary investment of the proceeds is 120,000.• 10%, 10,000,000, 10-year note dated January 1, 2019 with interest payable annually.•12.5%, 15,000,000, 10-year note dated December 31, 2018 with interest payable annually. The building is estimated to have useful life of 20 years and a residual value of 1,482,500. The Building is…
The company purchased a piece of Equipment on 12/1/2023 for use in its business operations. The company financed this purchase 100% and began using the Equipment immediately. The details of the loan are below: Amount $100,000.00 Interest rate 8% Loan period (months) 24 Payment amount $4, 522.73 Start Date 12/1/23 1. explain why an amortization schedule is important and create one 2. Create the journal entry required to initially record this loan. 3. Create any adjusting entries needed at 12/31/2023. 4. Create the journal entry to record the first payment (assume a 1/1/2024 due date)
solve both a and b Acruni Co. had the following loans in place at the beginning of 2019. 1 January 2019 GHC m10% Bank loan repayable 2020 1209.5% Bank loan repayable 2021 808.9% debenture repayable 2024 100On 1 January 2019, Acruni Co began construction of a qualifying asset, a piece of machinery for a hydroelectric plant, using existing borrowings. Expenditure drawndown for the construction was GHc30 million on 1 January 2019, and GHc20million on 1 October 2019. Surplus funds were invested temporarily at a rate of 2%. Requireda) Calculate the borrowing costs that can be capitalized for the piece ofmachinery. b) Compute the cost of the machinery that will be reported in the statementof financial position as at December ,2019
Capita had the following bank loans outstanding during the whole of 20X8: $m 9% loan repayable 20X9 15 11% loan repayable 20Y2 24 Capita began construction of a qualifying asset on 1 April 20X8 and withdrew funds of $6 million on that date to fund construction. On 1 August 20X8 an additional $2 million was withdrawn for the same purpose. Calculate the borrowing costs which can be capitalised in respect of this project for the year ended 31 December 20X8. A $560,000 B $472,500 C $750,000 D $350,00
ABC Co. had these loans outstanding for the year 2020: Specific Loan: P1,000,000 at 10% General Loan P20,000,000 at12%. The company began a self-construction of a building on January 1, 2020 and was completed on December 31, 2020. The following expenditures were made during 2020: January 1:P1,000,000 July 1: P2,000,000 November 1: P3,000,000 Total: P6,000,000 The cost of constructed building on December 31, 2020 must be
A bank customer requests financing for five air conditioning units (A/Cs) on a three – year lease from the bank. The bank buys the assets and leases them for three years. Financial details RM Cost of A/Cs 5,000.00 Five – year life – annual depreciation 1,000.00 p.a. Insurance (Takaful) 300.00 p.a. Profit required by the bank Year 1 450.00 Year 2 350.00 Year 3 250.00 REQUIRED: a. Define ljarah concept according to AAOIFI b. Calculate yearly ljarah rental in order to cover the costs and to make the required profit
PINAUTANG started constructing a building for its own use in March 1, 2020, PINAUTANG provided the following information related to the construction: Outstanding loans of the Company at January 1, 2020: Interest Rate Amount of loan Interest Cost 5% P10,000,000 P 500,000 10% 20,0000,000 2,000,000Total P30,000,000 P2,500,000 On January 1, 2020, PINAUTANG also borrowed P3,000,000 at 15% per annum, to specifically fund its expected construction on March 1, 2020. March 1, 2020 P1,000,000 February 1, 2021 P 3,000,000May 31, 2020 8,000,000 March 31, 2021 2,000,000July 1, 2020 7,000,000 November 31, 2020 4,000,000December 31, 2020 1,000,000 How much is the total cost of constructed asset as of December 31, 2020 a. 23,950,000 b. 21,944,217 c. 22,133,060 d. 22,152,467
On March 1, 2023, Cake Company began construction of a low-rise building for their own use. The construction was completed on October 31, 2023. It is the company's policy to capitalize interest cost as provided in IAS 23, Borrowing Costs. The company had the following outstanding debts during the year 2023: • 12%, 3-year note dated March 1, 2023. This loan relates specifically to the building project. - P10,000,000 9%, 5-year note dated July 16, 2022- P5,000,000 Expenditures on the project during 2023 were as follows: March 1-P6,700,000 July 10-7,800,000 September 1-6,250,000 What is the total cost of the self-constructed building?
PINAUTANG started constructing a building for its own use in March 1, 2020. PINAUTANG provided the following information related to the construction: Outstanding loans of the Company at January 1, 2020: Interest Rate Amount of loan interestCost 5% P10,000,000 P 500,000 10% 20.000.000 2,000,000 Total P30,000,000 P2,500,000 On January 1, 2020, PINAUTANG also borrowed P3,000,000 at 15% per annum, to specifically fund its expected construction on March 1, 2020. March 1, 2020 P1,000,000 February 1, 2021 P3,000,000 May 31, 2020 8,000,000 March 31, 2021 2,000,000 July 1, 2020. 7.000.000 November 31, 2020 4.000.000 December 31, 2020 1,000,000 How much is the total cost of the constructed asset as of December 31, 2020?
Pickles R Us is a pickle farm located in the Northeast. The following transactions take place: A. On November 6, Pickles borrows $820,000 from a bank to cover the initial cost of expansion. Terms of the loan are payment due in six months from November 6, and annual interest rate of 3%. B. On December 12, Pickles borrows an additional $200,000 with payment due in three months from December 12, and an annual interest rate of 10%. C. Pickles pays its accounts in full on March 12, for the December 12 loan, and on May 6 for the November 6 loan. Record the journal entries to recognize the initial borrowings, and the two payments for Pickles.
Dexter Construction Corporation is building a student condominium complex; it started construction on January 1, Year 1. Dexter borrowed 2.5 million on January 1 specifically for the project by issuing a 10%, 5-vear, 2.5 million note, which is payable on December 31 of Year 3. Dexter also had a 12%, 5-year, 3 million note payable and a 10%, 10-year, 1.8 million note payable outstanding all year. Calculate the weighted average interest rate on the non-construction-specific debt for Year 1. RE10-9 Refer to RE10-8. In Year 1, Dexter incurred costs as follows: Calculate Dexters weighted average accumulated expenditures.
NANGUTANG started constructing a building for its own use on January 1, 2020. NANGUTANG provided the following information related to the construction: Outstanding loans of the Company at January 1, 2020: Interest Rate Amount of loan Interest Cost 5% P10,000,000 P 500,000 10% 20,000,000 2,000,000 Total P30,000,000 P2,500,000 Construction expenditures: July 1, 2020 7,000,000 November 31,2020 3,000,000 December 31, 2020 1,000,000 The amount of borrowing cost that should be charged to profit or loss for the period is? 340,142 2,187,625 312,375 2,208,450

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