For Q2
Why is the £2.4M interest capitalised over 10 months? I did £1.4M for 10 months and £1M for 6 months minus 4 months of £1M income, when it was in use?

Question 3:
8%*300mil=24mil
9%*450mil=40.5mil
64.5mil÷750mil=8.6%
8.6%of 60mil for 8/12months=3 440 000
8.6%of 20mil for 2/12months=286 667
Total of the 2 is 3,726,667.00

I got question 1 and 3 wrong. I followed the method of calculating weighed average as demonstrated by the tutor. For question 1 I got weighted average 9.77% and add 9.77%*9/12*6 M and 9.77%*5/12*2 M. For question 3 I got weighted average 11.6% and add 8/12*60M*11.6% and 2/12*20M*11.6%. Please help me out. Thx

Dear Sir,
in Q#5-NCA-MCQs of BPP Kit, the Interest income is calculated from when Loan was drawn down(from 1 May(6 month)). im now totally confused. shuold it be calculated from 1 May or 1 July/ could you plz clear it for me?
thanks

In Q2 it’s not very clear when the funds are invested to receive investment income. I think it is open to interpretation, as the money could be invested when the funds are drawn down, or once the construction work commences.

The interest received on the invested funds can only be deducted when the interest expense is being capitalised, so we can only do this for the period from 30 June 2014 to 1 November 2014 (i.e. 4 months). In this instance it then doesn’t matter whether the money is invested immediately when drawn down or when construction commences, we can only net off the amounts from when construction commences.

hanzlahnisar says

For Q2

Why is the £2.4M interest capitalised over 10 months? I did £1.4M for 10 months and £1M for 6 months minus 4 months of £1M income, when it was in use?

utletsholathebe says

Question 3:

8%*300mil=24mil

9%*450mil=40.5mil

64.5mil÷750mil=8.6%

8.6%of 60mil for 8/12months=3 440 000

8.6%of 20mil for 2/12months=286 667

Total of the 2 is 3,726,667.00

utletsholathebe says

So when answering question 1 one must not round off the interest rate of 10.2307692 to 10.23 as it gives a totally different answer?

farhaanm says

I got question 1 and 3 wrong. I followed the method of calculating weighed average as demonstrated by the tutor. For question 1 I got weighted average 9.77% and add 9.77%*9/12*6 M and 9.77%*5/12*2 M. For question 3 I got weighted average 11.6% and add 8/12*60M*11.6% and 2/12*20M*11.6%. Please help me out. Thx

taqi1 says

Dear Sir,

in Q#5-NCA-MCQs of BPP Kit, the Interest income is calculated from when Loan was drawn down(from 1 May(6 month)). im now totally confused. shuold it be calculated from 1 May or 1 July/ could you plz clear it for me?

thanks

John Moffat says

Please ask this sort of question in the FR Ask the Tutor Forum and not as a comment on a lecture.

alastairk says

Hi,

They were tricky. I only got Q3 correct. Can anyone give some guidance on the other 3?

Thanks

hedge2004 says

In Q2 it’s not very clear when the funds are invested to receive investment income. I think it is open to interpretation, as the money could be invested when the funds are drawn down, or once the construction work commences.

P2-D2 says

Hi,

The interest received on the invested funds can only be deducted when the interest expense is being capitalised, so we can only do this for the period from 30 June 2014 to 1 November 2014 (i.e. 4 months). In this instance it then doesn’t matter whether the money is invested immediately when drawn down or when construction commences, we can only net off the amounts from when construction commences.

Hope this clears it up.

Thanks

rebescosco says

Yes it is clear sir, thank you so much.