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Did anyone give AA on 14th of September? I want to know the answer of the question in which the bankruptcy of customer was declared in a newspaper?
Sire, i have a doubt regarding borrowing costs
Can you calculate the borrowing cost of following question.
“During the year to 31 December 20X3 Rablen decided to build a new head office. The total cost of
the project was $20 million, and in order to fund the construction Rablen received a $20 million
6% loan on 1 April 20X3.
Construction of the head office began on 1 May 20X3, and was completed on 30 November 20X3.
Rablen began to use the building on 1 January 20X4 and expected to use the building for the next
25 years.
As not all of the funds were required immediately, Rablen invested $6 million of the loan in 5%
bonds from 1 April 20X3 to 1 July 20X3.”Q)What is the correct treatment in relation to the income earned by Rablen on the 5%
bonds?
A $75,000 should be deducted from the cost of the asset
B $75,000 should be recorded in investment income
C $300,000 should be deducted from the cost of the asset
D $300,000 should be recorded in investment income
The correct answer given in the book for the above question is A and i don’t get how, because the construction of the asset began in May, so the investment income earned that should be deducted from the capatalised borrowing cost should be of May and June, however they have included April also. The income earned in April should be recorded as investment income in SPL as the construction wasn’t started then.