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Mike,
1. In practice question 2 of chapter 17, the solution calculates the borrowing costs by multiplying 2.4m by 8% and 10/12.
I was wondering why the borrowing costs is only charged for 10 months. Although, the project started 2 months later, the money was borrowed for a year. Shouldn’t it charge for a year worth of interest?2. Could you please help me through question 5 of chapter 18 (income tax)? I don’t understand how these figures were calculated.
Thank you
“Although, the project started 2 months later, the money was borrowed for a year. Shouldn’t it charge for a year worth of interest?”
Borrowing costs should be capitalised only for the period during which work is being carried out on the project
Re the tax problem, open 2 T accounts
Go to the answer – you’ll find it when you click ‘submit’
Put the given figures in the answer into the 2 T accounts according to their debits or credits
and you should find that the total of the debit side of the Current Tax account is $900 lower than the total of the credit side
If you still have a problem, post again
OK?
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