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Need help with the illustration of net borrowing cost on pg 26 lecture notes

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA FR Exams › Need help with the illustration of net borrowing cost on pg 26 lecture notes

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  • October 14, 2020 at 5:06 pm #588899
    farhaanm
    Participant
    • Topics: 165
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    • ☆☆☆

    I am confused with the illustration in example 5. Why is the 0.2 million substrated from the 1.5 million. Also how was the interest income calculated?

    October 17, 2020 at 8:07 am #589433
    P2-D2
    Keymaster
    • Topics: 4
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    • ☆☆☆☆☆

    Hi,

    The net borrowing costs are capitalised. So, we have incurred 1.5 million of costs but also earned 0.2 million of income on money deposited.

    The interest income will be the $20 million invested for one month at 4%.

    Thanks

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