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Specific borrowings example

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA FR Exams › Specific borrowings example

  • This topic has 1 reply, 2 voices, and was last updated 6 years ago by P2-D2.
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  • October 18, 2018 at 8:17 am #479049
    gorikrish
    Member
    • Topics: 5
    • Replies: 0
    • ☆

    In the lecture for specific borrowings example, the loan is taken on March 1st , and the construction has also started on the same date , so while capitalizing the interest , why are we taking it as 10m*5%* 9/12 instead of 10m*5%*9/10 ?
    The loan is only for 10 months right ?

    October 19, 2018 at 4:33 pm #479222
    P2-D2
    Keymaster
    • Topics: 4
    • Replies: 7177
    • ☆☆☆☆☆

    Hi,

    Yes, the loan is for 10 months but the interest rate given is for a 12-month period, hence we pro-rate the interest over this period.

    Thanks

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