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A company had the following bank loans outstanding during the whole of 20×8 which form the company’s general borrowings for the year:
9% loan repayable 20×9 15
11% loan repayable 20y2 24
The company began construction of a qualifying asset on 1 April 20×8 and withdrew funds of 6 million on that date to fund the construction. On 1 August 20×8 an additional 2 million was withdrawn for the same purpose.
Calculate the borrowing costs which can be capitalised in respect of this project for the year ended 31 december 20×8.
I calculated the interest rate to be 10.230769% but in the answer the interest rate is given as 10.3%. So which is correct. Also the answer that I calculated was 545600 but in the book it is given as 549333. So which is correct
I’d use what is given in the book. You wouldn’t be penalised for any rounding in the exam.