Reference no: EM132679384
During 2020, an entity constructed an asset costing P8,430,000. The weighted average accumulated expenditures during 2020 totaled P7,800,000. The entity borrowed P4,000,000 at 7.5% on January 1, 2020. Funds not needed for construction were temporarily invested in short-term securities, and earned P118,000 in interest revenue. In addition to the construction loan, the entity had two other notes outstanding during the year, a P3,000,000, 10-year, 10% note payable dated October 1, 2018, and a P2,000,000, 8% note payable dated November 2, 2019. Construction was completed on December 31, 2020.
Problem 1: What amount should be capitalized as borrowing cost on December 31, 2020?
Group of answer choices
Option 1: 642,000
Option 2: 531,600
Option 3: 649,600
Option 4: 589,560
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