Borrowing Cost Prob

Taehyung Company began construction of its administration building at an estimated cost
of P10,000,000 on January 1, 2018. The construction is expected to be completed by

December 31, 2020. To finance borrowings, Taehyung Company borrowed P10,000,000,
10% 3-year note dated January 1, 2018, both principal and interest are payable on
December 31, 2020. In the first phase of the construction, there were idle funds which the
company invested. Income from this investment was P50,000.
Case no 1: Assume use of simple interest
1. How much is the capitalizable borrowing cost in 2018?
2. How much is the interest expense in 2018?
3. How much is the investment income in 2018?
Case no 2: Assume the interest is compounded quarterly in 2018
1. How much is the capitalizable borrowing cost in 2018?
2. How much is the interest expense in 2018?
3. How much is the investment income in 2018?
Hope Company began construction of its administration building at an estimated cost of
P2,000,000 on January 1, 2018. The building was completed on December 31, 2018. The
company had the following loans outstanding during the year 2018:
Rate Types Principal
10% General loan 500,000
12% Loans Payable 1,500,000
The following expenditures were made during 2018:

Date Amount
January 1, 2018 300,000
July 1, 2018 700,000
November 1, 2018 600,000
What is the cost of the building on December 31, 2018?

At the beginning of the current year, Namjoon Manufacturing Company borrowed
P1,600,000 at an interest of 10% specifically for the construction of a new building.
The actual borrowing cost on this loan is P160,000 but interest of P20,000 was earned from
the temporary investment of the proceeds prior to their disbursement.
Namjoon Manufacturing Company also had the following other loans in the current year
which were borrowed for general purposes but the proceeds were used in part for the
construction of the building.
Rate Types Principal Borrowing
Cost
10% Short term note 1,200,000 60,000
12% Long term note 1,600,000 192,000
The construction of the building started on January 1 and was completed on December 31
of the current year. Expenditures on the completed were made as follows:
Date Amount
January 1 500,000
April 1 1,000,000
May 1 1,000,000
September 1 1,000,000
December 31 500,000
 How much is the capitalizable borrowing cost for the year?
 What is the total cost of the building?
On January 1, 2017, Jimin Company granted a 5-year loan to borrower amounting to
P5,000,000. The loan bears interest of 10% and is collectible every December 31.
On December 31, 2018, Jimin Company considers the loan impaired and that only
P4,000,000 principal amount will be collected. No cash was received in 2018. The
prevailing rate of interest for a loan of this type is 12%
Assuming the following independent cases:

Case No. 1: Jimin Company accrued the interest on December 31, 2018 and the entire
P4,000,000 will be collected on the maturity date.
Compute for the ff:
1. Loan impairment loss on 2018
2. Interest income 2019
3. Carrying amount of loan, December 31, 2019

Case No. 2: Jimin Company did not accrue the interest on December 31, 2018 and the
entire P4,000,000 will be collected on the maturity date.
Compute for the ff:

Case No. 3: Jimin Company did not accrue interest on December 31, 2018 and the
P4,000,000 will be collectible as follows:
Date Amount
December 31, 2019 1,500,000
December 31, 2020 2,500,000
Compute for the ff:


Case No. 3: Jimin Company did not accrue interest on December 31, 2018 and the
P4,000,000 will be collectible as follows:
Date Amount
January 1, 2019 1,000,000
December 31, 2019 2,000,000
December 31, 2020 1,000,000
Compute for the ff:

On January 1, 2019, Shooky Company granted a 5-year loan to borrower amounting to
On December 31, 2020, Shooky Company considers the loan impaired and that only
P4,000,000 principal amount will be collected. No cash was received in 2020 and the
company did not accrue the interest because of the impairment. The prevailing rate of
interest for a loan of this type is 12%
On December 31, 2021, the financial condition of the borrower has improved and that it can
pay its entire unpaid obligation, including principal and interest at maturity.
Compute for the gain on reversal of impairment loss in 2021 under:
1. PAS 39
2. PFRS 9

Borrowing Cost Prob

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Taehyung Company began construction of its administration building at an estimated cost

of P10,000,000 on January 1, 2018. The construction is expected to be completed by

The following expenditures were made during 2018:

What is the cost of the building on December 31, 2018?

Assuming the following independent cases:

Assuming the following independent cases:

Assuming the following independent cases:

Compute for the ff:

Assuming the following independent cases:

Compute for the ff:

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