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Determine the amount of interest to be capitalized

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Reference no: EM132740357

Question - On December 31, 2019, Joross Company borrowed P3,000,000 and issued a 12%, 3-year note to finance the construction of a new building. In 2020, the company made the following expenditures related to this building.

January 1 P 360,000

June 1 600,000

July 1 1,500,000

December 1 1,500,000

Other debt outstanding and other information follow:

10-year, 13% bonds, dated December 31, 2019, interest payable annually P4,000,000

6-year, 10% note, dated December 31, 2019 interest payable annually 1,600,000

Interest revenue earned in 2020 from temporary investments of the specific borrowing 40,000

Instructions -

1. Determine the amount of interest to be capitalized in 2020.

2. If the specific borrowing amounted to P1,200,000 only (instead of P3,000,000), how much is the capitalized interest in 2020?

Reference no: EM132740357

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