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Hello
I do not understand the calculation shown in the answer ($(20 + 70 + 120 + 170) since the question mentions that “The direct costs were $20 million in February 2016 and then $50 million in each month until the year end, 31 May 2016.” I therefore got the total cost as 20 plus (50 x 3) =170
“The weighted-average carrying amount of the stadium during the period is
$(20 + 70 + 120 + 170) million/4, that is $95 million.The capitalisation rate of the borrowings of Emcee during the period of construction is 9% per annum, therefore the total amount of borrowing costs to be capitalised is the weighted-average carrying amount of the stadium multiplied by the capitalisation rate.
That is ($95 million x 9% x 4/12) $2·85 million.”Links to the past paper:
https://www.accaglobal.com/content/dam/ACCA_Global/Students/prof/p2/P2%20INT/j16_hybrid_p2int_q.pdfhttps://www.accaglobal.com/content/dam/ACCA_Global/Students/prof/p2/P2%20INT/j16_hybrid_p2int_a.pdf
Hi,
They haven’t worked out the total cost like you have done above. They have worked out a weighted average cost so starting with the initial cost of $20 million they have then added on $50 million for each of the next three months and averaged it out based on the number of months of construction.
End of Feb = $20 million
End of March = $70 million ($20 million + $50 million) etc.Hi, This was also the same problem I had from the first post: ‘I do not understand the calculation shown in the answer ($(20 + 70 + 120 + 170) since the question mentions that “The direct costs were $20 million in February 2016 and then $50 million in each month until the year end, 31 May 2016.” I therefore got the total cost as 20 plus (50 x 3) =170’
I get where the figures have come from but I still don’t understand why 20+(50×3)/4 isn’t the correct answer compared to the answer in the textbook?
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