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Hi Sir,
A car was bought on a loan from the bank. The bank directly paid an amount to the suppier of a car and a company is required to pay the bank monthly (Capital & Interest Payments) for the next 3 years. Is the Interest Capitalised & what Journal entries are required?
Thanks In Advance
Is the car a qualifying asset?
Extract from IASPLUS ….
….a ‘qualifying asset’ (one that necessarily takes a substantial period of time to get ready for its intended use or sale)
Expense the bank interest!
Sorry Sir, but am still confused here. Please refer to June 2012 Q5 part a.
This is an extract of the answer from the BPP Book. Any idea why they is no mention of a qualifying asset in the kit
”IAS 23 Borrowing costs requires directly attributable costs to be capitalised as tangible non-current assets. This would include the borrowing costs, which are capitalised over the period of construction. This would be the six months from 1 March to 1 September. The date when the asset started being used is not relevant to this calculation”
Kindly advise
Thanks in advance
“which are capitalised over the period of construction”
So – let me get this straight – you are comparing the self-construct extension of a factory with the purchase of a car. Have I understood you correctly?
Last time I drove down the motorway from Manchester to Dover I saw no, I repeat, NO self-constructed factory extensions travelling North!
Here again is the definition of a qualifying asset:
“….a ‘qualifying asset’ (one that necessarily takes a substantial period of time to get ready for its intended use or sale)”
Just how substantial is the time taken to acquire a car?
Come on Gulam! THINK!
I’ve just arrived back home from the office and, would you believe it …. there, coming the other way, was a self-construct warehouse
I really couldn’t believe it!
But as I got closer, I realised that it was stationery. I should have known because it’s been in the course of construction now for over a year. Maybe it was just wishful thinking after your previous posts
🙂
In a nutshell, we can say that IAS 23 relates to self constructed assets? Am i on track there
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