Q3 of Bpp kit.
capita had the following outstanding during the whole of 2008
9% loan repayable 2009 $15m
11% loan repayable 2012 $ 24m
Capita began construction of a qualifying asset on 1 april 2008 and withdrew funds of $6 millions on that date to fund construction. on 1st august an additional $2m was withdrawn for the same purpose.
Question> Calculate the borrowing cost which can be capitalised in respect of this project for the year ended 31 dec 2008.
Please sir help me understand this question and how to go about solving it.
thank you for always being there for us.
Ask the Tutor ACCA FR
Help with capitalised borrow cost
11y ago#1Before I tell you how to get there, please confirm the figure is 545,556!
Good morning Sir Mike,
Bpp answer is $ 560,000.
11y ago#3I still get $545,556 (ish)
Total interest for the year is 9% x $15,000,000 + 11% x $24,000,000 = $3,990,000
For $6,000,000 draw down for 9 months it's $3,990,000 / 12 x 9 / 39 x 6 = $460,385
For $2,000,000 draw down for 5 months it's $3,990,000 / 12 x 5 / 39 x 2 = $85,256
Added together that $545,641
Does BPP not give you any workings?
Sir Mike
Good morning,
Bpp workings.
Total loan= $15+$24= 39.
therefore... (9%x15/39)+(11%x24/39)=10.5%
SO, 10.5%X$6000,000X9/12=47250
10.5%X2000,000 X 5/12=8750
= 47250+8750=$560,000
Thank for your working. leaning a new approach.
11y ago#5No, no, I like the BPP way. I weighted the interest cost but my way was very crude. To calculate 9% on 15/39 of the total loan and 11% on 24/39 of the total loan is a better way. Hats off to BPP
Sign in to reply to this topic.