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IAS23 (Borrowing cost)

Forums › ACCA Forums › ACCA FR Financial Reporting Forums › IAS23 (Borrowing cost)

  • This topic has 0 replies, 1 voice, and was last updated 11 months ago by Jumaev.
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  • Author
    Posts
  • February 20, 2022 at 6:18 am #648927
    Jumaev
    Participant
    • Topics: 3
    • Replies: 8
    • ☆

    Hi ,
    I am little a bit confused in regarding to this question how to solve, Can you help me ?
    On September 1, 2014, Spin Industries Limited (SIL) started construction of its new office building
    and completed it on May 31, 2015. The payments made to the contractor were as follows:
    Date of Payment $
    September 1, 2014- 10,000,000
    December 1, 2014- 15,000,000
    February 1, 2015 -12,000,000
    June 1, 2015- 9,000,000
    In addition to the above payments, SIL paid a fee of $8 million on September 1, 2014 for obtaining
    a permit allowing the construction of the building.
    The project was financed through the following sources:
    (i) On August 1, 2014 a medium term loan of $25 million was obtained specifically for the
    construction of the building. The loan carried mark up of 12% per annum payable semiannually. A commitment fee @ 0.5% of the amount of loan was charged by the bank.
    Surplus funds were invested in savings account @ 8% per annum. On February 1, 2015
    SIL paid the six monthly interest plus $5 million towards the principal.
    (ii) Existing running finance facilities of SIL
    ? Running finance facility of $28 million from Bank A carrying mark up of 13% payable
    annually. The average outstanding balance during the period of construction was
    $25 million.
    ? Running finance facility of $25 million from Bank B. The mark up accrued during the
    period of construction was $3 million and the average running finance balance during
    that period was $20 million.
    Required
    Calculate the amount of borrowing costs to be capitalised on June 30, 2015 in accordance with the
    requirements of International Accounting Standards.
    (Borrowing cost calculations should be based on number of months).

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