What amount of interest is capitalized on December 31, 2019? 2. What is the interest expense for December 31, 2019? 3. What is the total cost of the building on December 31, 2019?
On January 1, 2019, Q Co. contracted for the construction of a building for 20,000,000 on land that it had
previously purchased. The building was completed on December 31, 2019. The following payments were made to
the contractor:
Payment date Amount
January 1. 2,000,000
March 1. 6,000,000
August 30. 10,000,000
December 1. 2,000,000
The following represents the borrowings of Q Co. as of December 31, 2019:
• 10%, 7,000,000, 4-year note dated January 1, 2019 with simple interest payable annually, specifically
borrowed to finance the construction project. Interest income earned on the temporary investment of the
proceeds is 120,000.
• 10%, 10,000,000, 10-year note dated January 1, 2019 with interest payable annually.
•12.5%, 15,000,000, 10-year note dated December 31, 2018 with interest payable annually.
The building is estimated to have useful life of 20 years and a residual value of 1,482,500. The Building is depreciated using the sum of years digit method. On January 1, 2022 Q Co. changed the depreciation method from SYD to straight-line method. On December 31, 2024 the building was revalued. The following data pertain
to the building on the date of revaluation:
Cost Replacement Cost
Building ? 4,482,500
Residual Value 1,482,500 1,482,500
Accum. Dep. ? ?
After the revaluation, the building is depreciated using straight-line method.
Questions:
1. What amount of interest is capitalized on December 31, 2019?
2. What is the interest expense for December 31, 2019?
3. What is the total cost of the building on December 31, 2019?
4. What is the depreciation expense on December 31, 2020?
5. What is the accumulated depreciation of building on December 31, 2021?
6. What is the carrying amount of the building on December 31, 2021?
7. What is the depreciation expense on December 31, 2022?
8. What is the accumulated depreciation on December 31, 2023?
9. What is the carrying amount of the building on December 31, 2024 (before revaluation)?
10. What is the carrying amount of the building on December 31, 2024 (after revaluation)?
11. What is the amount of Revaluation Surplus on December 31, 2024?
12. What is the depreciation expense on December 31, 2025?
13. What is the accumulated depreciation on December 31, 2026?
14. What is the balance of Revaluation Surplus on December 31, 2026?
15. What is the carrying amount of the Building on December 31, 2026?
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