• Skip to primary navigation
  • Skip to main content
  • Skip to primary sidebar
Free ACCA & CIMA online courses from OpenTuition

Free ACCA & CIMA online courses from OpenTuition

Free Notes, Lectures, Tests and Forums for ACCA and CIMA exams

  • ACCA
  • CIMA
  • FIA
  • OBU
  • Books
  • Forums
  • Search
  • Register
  • Login
  • ACCA Forums
  • Ask ACCA Tutor
  • CIMA Forums
  • Ask CIMA Tutor
  • FIA
  • OBU
  • Buy/Sell Books
  • All Forums
  • Latest Topics

PQ Awards Nominations

Please help us to win one of the PQ Magazine awards and send in the voting form >>
You can nominate us in any or all of the following categories: Online College of the Year, Study Resource of the Year, Private Sector Lecturer of the Year, and Accountancy Personality of the Year.

Specially for OpenTuition students: 20% off BPP Books for ACCA & CIMA exams – Get your BPP Discount Code >>

borrowing cost (mock exam mcq)

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA FR Exams › borrowing cost (mock exam mcq)

  • This topic has 6 replies, 2 voices, and was last updated 7 years ago by MikeLittle.
Viewing 7 posts - 1 through 7 (of 7 total)
  • Author
    Posts
  • December 4, 2015 at 9:35 am #287477
    for8verlik
    Member
    • Topics: 17
    • Replies: 25
    • ☆

    Q:
    In the context of borrowing costs, the following information is relevant. How much borrowing costs must be capitalised?

    A company arranged on 28feb,2011 to borrow $20m funds at the rate of 6% to finance the dev of a qualifying asset. Planning and architecture’s fees cost $500,000 and were paid out of general cash resources on 31 March 2011. Work commenced on 3 April and the first trance of money $ 6m was drawn down on 30 April 2011. Of this amount, $4m was spent immediately and the remaining $2m was invested at the rate of 4% pa until it was spent on 1 july together with $10m of the second and final tranche of $14m, the balance invested at 4% pa

    Work was halted on 31 Aug by industrial action and was not recommenced until 1 October. on 30 nov, the investment was cashed in and the final $4m spent. The asset was completed on 1 feb 2012

    a) $ 680,000
    b) $ 660,000
    c) $ 593,333
    d) nil, it is available for the company to choose to expense the total borrowing cost

    ANSWER

    Borrowing 6%
    1/3 20m
    work commence on 3/4

    1/5 6m drawn for this project
    1/7 16m (10+6)

    Investment 4%
    1/5 2m (spent 4m)
    1/7
    Expense
    1/4 0.5m (paid out of general cash irrelevant)

    er…i don’t actually understand what does it mean..any help would be appreciated

    December 4, 2015 at 12:31 pm #287512
    MikeLittle
    Keymaster
    • Topics: 26
    • Replies: 22706
    • ☆☆☆☆☆

    I suggest that you look at the free course notes on this site where you’ll find a detailed chapter and example illustrating every point that you have given in the example above

    May I ask – have you actually looked at the course notes? Within those notes there is everything that you need to pass the F7 exam or did you not know that?

    December 6, 2015 at 8:18 am #288117
    for8verlik
    Member
    • Topics: 17
    • Replies: 25
    • ☆

    i think the correct working is:
    borrowing cost
    1/5 = 6mil
    1/7= 14mil
    sept work stopped
    1/10 = work restart
    complete on 1/2

    Total borrowing cost to be capitalised:
    6mil*2/12*0.06+20mil*(2/12+4/12)*0.06= 60,000+600,000=$660,000

    December 6, 2015 at 8:45 am #288124
    for8verlik
    Member
    • Topics: 17
    • Replies: 25
    • ☆

    and minus the investment income 4%
    1/5 2mil
    1/7 4mil
    sept stopped
    1/10 restart

    1/12 nil

    investment income = 2mil*2/12*0.04+4mil(2/12+2/12)*0.04
    =13333.33+53333.33=66666.66
    borrowing cost-investment income=660,000-66666.66=$593,333

    December 6, 2015 at 9:43 am #288142
    MikeLittle
    Keymaster
    • Topics: 26
    • Replies: 22706
    • ☆☆☆☆☆

    Did you look at the free course notes as I recommended in my previous post?

    December 6, 2015 at 9:49 am #288147
    for8verlik
    Member
    • Topics: 17
    • Replies: 25
    • ☆

    Yea reading.. Headaching thou haha. Is my working correct?

    December 6, 2015 at 9:54 am #288150
    MikeLittle
    Keymaster
    • Topics: 26
    • Replies: 22706
    • ☆☆☆☆☆

    What does the answer say? You can see for yourself whether your workings are correct

  • Author
    Posts
Viewing 7 posts - 1 through 7 (of 7 total)
  • You must be logged in to reply to this topic.
Log In

Primary Sidebar

ACCA News:

 

ACCA My Exam Performance for non-variant Applied Skills exams is available NOW

NEW! Download the ACCA Pass Guide

FREE Verifiable CPD for ACCA Members

ACCA mock exams and debrief videos

ACCA Options:  “Read the Mind of the Marker” articles

Subscribe to ACCA’s Student Accountant Direct

Donate

If you have benefited from OpenTuition please donate.

ACCA CBE 2023 Exams

Instant Poll * How was your exam, and what was the result?

BT CBE exam was.. | MA CBE exam was..
FA CBE exam was.. | LW CBE exam was..

Specially for OpenTuition students

20% off BPP Books

Get BPP Discount Code

Latest comments

  • tobimillz100 on Activity Based Costing part 1 – ACCA Performance Management (PM)
  • omarcham on IASB Conceptual Framework – Introduction – ACCA Financial Reporting (FR)
  • Iby2012 on Introduction to Financial Accounting – ACCA Financial Accounting (FA) lectures
  • Iby2012 on Introduction to Financial Accounting – ACCA Financial Accounting (FA) lectures
  • ANISH1903 on Outsourcing, shared services and disruptive technologies – ACCA Strategic Business Leader (SBL)

Copyright © 2023 · Support · Contact · Advertising · OpenLicense · About · Sitemap · Comments · Log in


We use cookies to show you relevant advertising, find out more: Privacy Policy · Cookie Policy