Reference no: EM132825132
Question - Big Stop Corporation decided to expand and build a new manufacturing site in 2020.
The entity has three outstanding loans as of December 31, 2019, as follows:
P25,000,000 loan from PI Bank; 10% annual interest; due December 31, 2021.
P30,000,000 loan from PN Bank; 11% annual interest; due December 31, 2023.
P15,000,000 loan from DO Bank; 8.5% annual interest; due December 31, 2023.
Big Stop decided to use the cash financed by the general borrowings, and not to obtain additional loans for the construction.
The construction started on January 5, 2020, and ended on December 31, 2020.
Presented below is the schedule of payments made by the entity during the construction:
Date Amount
January 5, 2020 2,400,000
April 2, 2020 4,800,000
June 1, 2020 5,500,000
August 31, 2020 8,400,000
September 30, 2020 900,000
December 1, 2020 1,200,000
December 31, 2020 450,000
Required -
1. How much is the capitalizable borrowing cost?
2. How much is the interest expense for the period?
3. What is the initial cost of the building?
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