On 1 January 2011, Sherry Co. Ltd entered into a GH ¢ 11,000,000 contract for the construction of an office complex in Kumasi. The building was completed at the end of December 2011. During the period, the following payments were made to thhe contractor: Payment date Amount (GH ¢’000) 1 January 2011 1,000 31 March 2011 3,000 30 September 2011 6,000 31 December 2011 1,000 11,000 Sherry’s borrowings as at its year end of 31 December 2011 were as follows: 10% 4-year Loan Note with simple interest payable annually, which relates specifically to the building project; debts outstanding at 31 December 2011 amounted to GH ¢ 3,500,000. Interest of GH ¢ 350,000 was incurred on these borrowings during the year, and interest income of GH ¢ 100,000 was earned on these funds while they were held in anticipation of payments. 12.5% Five-year Loan Note with simple interest payable annually; debt outstanding at 1 January 2011 amounted to GH ¢ 5,000,000 and remained unchanged during the year 10% Five year Loan Note with simple interest payable annually; debt outstanding at 1 January 2011 amounted to GH ¢ 7,500,000 and remained unchanged during the year. Required Calculate the borrowing costs to be capitalised. (Interest expenses are the only borrowing costs).
On 1 January 2011, Sherry Co. Ltd entered into a GH ¢ 11,000,000 contract for the
construction of an office complex in Kumasi. The building was completed at the end of
December 2011. During the period, the following payments were made to thhe
contractor:
Payment date Amount (GH ¢’000)
1 January 2011 1,000
31 March 2011 3,000
30 September 2011 6,000
31 December 2011 1,000
11,000
Sherry’s borrowings as at its year end of 31 December 2011 were as follows:
10% 4-year Loan Note with simple interest payable annually, which relates
specifically to the building project; debts outstanding at 31 December 2011
amounted to GH ¢ 3,500,000. Interest of GH ¢ 350,000 was incurred on these
borrowings during the year, and interest income of GH ¢ 100,000 was earned on
these funds while they were held in anticipation of payments.
12.5% Five-year Loan Note with simple interest payable annually; debt outstanding
at 1 January 2011 amounted to GH ¢ 5,000,000 and remained unchanged during the
year
10% Five year Loan Note with simple interest payable annually; debt outstanding at
1 January 2011 amounted to GH ¢ 7,500,000 and remained unchanged during the
year.
Required
Calculate the borrowing costs to be capitalised. (Interest expenses are the only borrowing
costs).
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