Reference no: EM132626324
Marissa Company had the following outstanding obligations from periods 2014-2017:
Construction loan - P2,000,000, with interest of 15% per annum, payable at the end of 2019. Some of the proceeds were temporarily invested on short-term investments, which earned interest income amounting to P50,000.
Bonds payable - P8,000,000, with interest of 12% per annum, payable at the end of 2020
Note payable to bank - P3,000,000, with interest of 10% per annum, payable at the end of 2017
Note payable to a certain creditor - P4,000,000, with interest of 8% per annum, payable at the end of 2019. Some of the proceeds were temporarily invested, which resulted to income amounting to P60,000.
The entity began the self-construction of a building on January 1, 2016 and was completed on December 31, 2017. The building was classified as a qualifying asset, subject to capitalization of borrowing costs.
The following expenditures (pertaining to cost of materials, labor and overhead incurred during construction) were made:
January 1, 2016 P2,000,000
July 1, 2016 4,000,000
November 1, 2016 3,000,000
July 1, 2017 1,000,000
10,000,000
Required
Question a. Compute for the total cost of the building on the date construction is completed.
Question b. Compute for the total cost of the building assuming it was finished on August 31, 2017.
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