Gidi professional institute is constructing a tuition center at Aboabo that will take about 18 months to complete. The company commenced construction on 2 January, 2018. The following payments were made during the year: 31 January GH¢ 40,000,000 1 March GH¢90,000,000 30 June GH¢20,000,000 31 October GH¢40,000,000 30 November GH¢50,000,000 The first payment on 31 January was funded from the company’s pool of debts. However, the company succeeded in raising Medium-Term Loan Notes for an amount of GH¢160,000,000 on 31 March 2018 at a simple interest rate of 9 percent per year, calculated and payable monthly in arrears. These funds were specifically used for the construction. Excess funds were temporarily invested at 6 percent monthly in arrears and payable in cash. The pool of debts was again used for a GH¢40,000,000 payment on 30 November 2018 which could not be funded from the Medium-Term Loan Notes. The construction project was temporarily halted for three weeks in May 2018 when substantial technical and administrative work was carried out. The following amounts of debts were outstanding at the reporting date of 31 December 2018: GH¢’000 Medium-Term Loan Notes 160,000 Bank Overdraft 240,000 10% 7-year Notes 1/10/2018 with simple interest payable annually at 31 Dec 1,800,000 For the bank overdraft, the weighted average amount outstanding during the year was GH¢150,000,000 and the total interest charged by the bank amounted to GH¢6,760,000 for the year. Required Calculate the total amount of interest to be capitalised
Gidi professional institute is constructing a tuition center at Aboabo that will take about 18 months to complete. The company commenced construction on 2 January, 2018. The following payments were made during the year:
31 January GH¢ 40,000,000
1 March GH¢90,000,000
30 June GH¢20,000,000
31 October GH¢40,000,000
30 November GH¢50,000,000
The first payment on 31 January was funded from the company’s pool of debts. However, the
company succeeded in raising Medium-Term Loan Notes for an amount of GH¢160,000,000 on 31
March 2018 at a simple interest rate of 9 percent per year, calculated and payable monthly in arrears.
These funds were specifically used for the construction. Excess funds were temporarily invested at 6
percent monthly in arrears and payable in cash. The pool of debts was again used for a
GH¢40,000,000 payment on 30 November 2018 which could not be funded from the Medium-Term
Loan Notes. The construction project was temporarily halted for three weeks in May 2018 when
substantial technical and administrative work was carried out.
The following amounts of debts were outstanding at the reporting date of 31 December 2018:
GH¢’000
Medium-Term Loan Notes 160,000
Bank Overdraft 240,000
10% 7-year Notes 1/10/2018 with simple interest payable annually at 31 Dec 1,800,000
For the bank overdraft, the weighted average amount outstanding during the year was
GH¢150,000,000 and the total interest charged by the bank amounted to GH¢6,760,000 for the year.
Required
Calculate the total amount of interest to be capitalised
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