Specific borrowings example

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October 18, 2018 at 8:17 am #479049
gorikrish
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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
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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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