Reference no: EM132704425

On January 1, 2016 Sleepy Company hired Doc Construction to build its regional office building for P2,820,000 on a land that it had previously purchased.

The building was completed at the end of December 31, 2016, and during the period the following payments were made to the contractor:

January 1 P300,000      September 30 P540,000
April 1 960,000             December 1 240,000
June 30 780,000

Sleepy Company's borrowings as of December 31, 2016 were as follows:

1. 10% - 4-year note, interest annually, borrowed specifically to finance the project; debt outstanding December 31, 2016 amounted to P700,000. Interest of P65,000 was incurred during the year and interest income of P20,000 was earned on these funds
2. 5% 10-year note, interest payable annually; issued January 1, 2016 face amount P1,000,000 and remained unchanged during the year; and 
3. 10% 10-year note interest payable annually; issued January 1, 2016 face amount P1,500,000 and remained unchanged during the year.

Problem 1: What the borrowing costs capitalized at yearend is