On 1 Jan 2016 X co. borrowed $1.5m to finance the production of two assets, both of which were expected to take a year to build. work started during 2016. The loan facility was drawn down and incurred on 1 Jan 2016, and was utilized as follows, with the remaining funds invested temporarily.
1 Jan 2016 ….. Asset A 250,000 ; Asset B 500,000
1 July 2016……Asset A 500,000 ; Asset B 500,000
The loan rate was 9% and X Co. can invest surplus funds at 7%.
Ignore compound interest. Calculate borrowing costs which may be captitalised for each of the assets and consequently the cost of each asset as at 31 Dec 2016.
Sir, I have the answer in the book but I do not understand the working. Can you please explain it step by step in detail? Thank you.
If you want the tutor to answer your question you should ask on the ask the tutor forum.This forum is primarily designed to allow students to help one another.
You must be logged in to reply to this topic.