Chapter 15 Problem 15-36 to 40
Problem 15-36 Answer A
Since the old machine has no available fair value, the new machine received in exchange is recorded at its cash price without trade in of P900,000. The average published retail value of the old machine is not necessarily its fair value.
Problem 15-37 Answer A
Average expenditures (20,000,000 / 2) 10,000,000
Multiply y capitalization rate 12%
Interest on average expenditures 1,200,000
The capitalizable borrowing cost is limited to the actual borrowing cost incurred. In this case, the computed amount of P1,200,000 is more than the actual borrowing cost of P1,020,000. Accordingly, the capitalizable interest is P1,020,000. Note that in computing the average expenditures, the amount of P20,000,000 is simply divided by 2 because the said amount is incurred evenly during the year ended 2008.
Problem 15-38 Answer C
Since the actual interest incurred is not given, the interest on the average expenditures is determined.
Average expenditures (9,600,000 / 2) 4,800,000
Interest on average expenditures (4,800,000 x 10%) 480,000
Interest income on unexpended portion (320,000)
Capitalizable interest 160,000
Problem 15-39 Answer B
Accumulated expenditures at the end of two years 3,000,000
Average expenditures in the third year (8,000,000 / 2) 4,000,000
Total 7,000,000
Capitalizable interest (7,000,000 x 9%) 630,000
Problem 15-40 Answer B
Average accumulated expenditures 2,500,000
Specific borrowing (1,500,000)
Applicable to general borrowing 1,000,000
Specific (6% x 1,500,000) 90,000
General (9% x 1,000,000) 90,000
Capitalizable interest 180,000
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