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Find how should the entity account for the loan in year

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Reference no: EM132993681

Problem 1: Economic factors that shorten the service life of an asset include?

a) Obsolescence.

b) Supersession.

c) Inadequacy.

d) All of these.

Problem 2: An entity borrowed P20,000,000 on Jan. 1, 2020 specifically to finance the construction of a building (Building A). This building was completed on July 1, 2021. Also, the entity has another building (Building B) still under construction at December 31, 2021. How should the entity account for the P20,000,000 loan in the year ended December 31, 2021?

a) Treat P20 million as specific borrowing for Building A from Jan. 1 to June 30 and specific borrowing for Building B from July 1 to Dec. 31.

b) Treat P20 million as specific borrowing for Building A from Jan. 1 to June 30 and general borrowing for Building B from July 1 to Dec. 31.

c) Treat P20 million as specific borrowing for Building A from Jan. 1 to June 30 and excluded from borrowings for Building B.

d) Treat P20 million as general borrowing from Jan. 1 to Dec. 31.

Reference no: EM132993681

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