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Hello Tutor,
I d like to know the calculation of the finance costs eligible for capitalisation and the other charged to P/L income On 31 March 20X5 of the following example:On 1 August 20X4, Alpha began to construct a power plant. The construction cost was $60 million and the construction was completed on 30 November 20X4. The plant was available for use from that date. Following a formal opening ceremony, the plant was brought into use on 1 January 20X5. Alpha estimated that the useful life of the plant was ten years.On 1 July 20X4, Alpha borrowed $60 million to finance the construction of the power plant. The interest payable on this borrowing was 8% per annum, payable in arrears on 30 June each year.
ThanksHi,
I never just answe questions outright without seeing some sort of attempt being made first.
To help you answer it then we start capitalising when borrowing has started, expenditure is being incurred and construction has started.
It then stops when substantially all the activities are completed for it intended use.
Try it again now and see how you get on. I can then help you further.
Thanks
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