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Borrowing costs::question from BPP study text Stremans co.

Forums › ACCA Forums › ACCA FR Financial Reporting Forums › Borrowing costs::question from BPP study text Stremans co.

  • This topic has 1 reply, 2 voices, and was last updated 8 years ago by MikeLittle.
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  • September 8, 2016 at 11:36 am #339010
    busybeestudying
    Member
    • Topics: 22
    • Replies: 11
    • ☆

    Hi,

    I have watched borrowing costs lecture on open tuition and practised the question in the video too.
    I am tryin to solve the question from bpp study text page 51 using the same style as suggested in the tutorial.

    I have managed to do investment income, but not the borrowing costs.

    Also what do we need to do with the remaining funds that were invested temporarily?
    do they need to be included in borrowing cost.
    can anyone please help.

    Here is the question:
    On 1 January 20×6 Stremans Co Borrowed $1.5m to finance the production of two assests, both of which were expectedto take a year to build.
    Work started during 20×6. The loan facility was drawn down and incurred on 1 January 20×6 and was utilized as follows, with the remaining funds invested temporarily

    Asset A($000) Asset B($000)
    1.1.20×6 250 500
    1.7.20×6 250 500

    The loan rate was 9% and Stremans co can invest surplus funds at 7%

    Required: Ignoring compound interest, cacluate borrowing costs which may be capitalixed for each of the assets and consequently the cost of each asset as at 31/12/20×6

    Thank you in advance for your help.

    September 19, 2016 at 9:45 pm #340964
    MikeLittle
    Keymaster
    • Topics: 27
    • Replies: 23327
    • ☆☆☆☆☆

    I’ve already answered this!

  • Author
    Posts
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