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1. On January 1, 2016, SAMSON MFG. CO. began construction of a building to be used as its
office headquarters. The building was completed on June 30, 2017.
On January 3, 2016, the company obtained a P5 million construction loan with a 10% interest
rate. The loan was outstanding all of 2016 and 2017. The company’s other interest-bearing
debts included a long-term note of P25 million with an 8% interest rate, and a mortgage of P15
million on another building with an interest rate of 6%. Both debts were outstanding during all
of 2016 and 2017. The company’s fiscal year-end is December 31.
5. What is the total cost of the building (including the interest capitalized in 2016 and 2017)?
A. P24,600,000 B. P20,817,788 C. P20,905,457 D. P20,630,625
II- BULKAN COMPANY purchased a machine for P300,000 on January 1, 2014, with the
following additional items paid or incurred:
Separation pay for laborer laid off upon acquisition of new machine.....................P3,600
Loss on sale of machine replaced.........................................................................3,900
Transportation in.................................................................................................3,000
Installation cost.................................................................................................12,000
The new machine is estimated to have a useful life of 10 years and a residual value of P12,000.
On January 1, 2017, new parts which cost P37,800 were added to the machine so as to reduce
its fuel consumption, but with no change in its estimated life or residual value.