Benson Limited is constructing a Power Plant which was completed on 31st December 2019. The company obtained a bank loan of R1,000,000 at a rate of 15% per annum to construct the Power Plant on 1st January 2019. As of 31st December 2019, Benson Limited also had the following loans outstanding: 18% 5-year loan Note of R1,500,000 14% Debentures of R1,000,000 Expenditures on the project were made as follows: On the 31st March 2019, R600,000 was incurred; R800,000 was incurred on 30th June 2019; The final expenditure incurred was R300,000 on 31st December 2019. During the year Benson Limited invested R400,000 of the bank loan for 2 months at an interest of 9% per annum. Required: Determine the amount borrowing costs to capitalized and expensed. I. II. I. II. III.

Benson Limited is constructing a Power Plant which was completed on 31st December 2019. The company obtained a bank loan of R1,000,000 at a rate of 15% per annum to construct the Power Plant on 1st January 2019. As of 31st December 2019, Benson Limited also had the following loans outstanding: 18% 5-year loan Note of R1,500,000 14% Debentures of R1,000,000 Expenditures on the project were made as follows: On the 31st March 2019, R600,000 was incurred; R800,000 was incurred on 30th June 2019; The final expenditure incurred was R300,000 on 31st December 2019. During the year Benson Limited invested R400,000 of the bank loan for 2 months at an interest of 9% per annum. Required: Determine the amount borrowing costs to capitalized and expensed. I. II. I. II. III.

FINANCIAL ACCOUNTING

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ISBN:9781259964947

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Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

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Question

Benson Limited is constructing a Power Plant which was completed on 31st December 2019. The
company obtained a bank loan of R1,000,000 at a rate of 15% per annum to construct the Power
Plant on 1st January 2019. As of 31st December 2019, Benson Limited also had the following loans
outstanding:
18% 5-year loan Note of R1,500,000
14% Debentures of R1,000,000 Expenditures on the project were made as follows:
On the 31st March 2019, R600,000 was incurred;
R800,000 was incurred on 30th June 2019;
The final expenditure incurred was R300,000 on 31st December 2019.
During the year Benson Limited invested R400,000 of the bank loan for 2 months at an interest of 9%
per annum.
Required: Determine the amount of borrowing costs to be capitalized and expensed.
I.
II.
I.
II.
III.

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why was 14% used and not 15 % in your previous answer ?

u took 1000 000 X 14%

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