On 1 January 2019 Stremans Co. borrowed GHc 1.5 million at a rate of 8% to finance the production of two assets, both of which were expected to take a year to build. Work started during 2019. The loan facility was drawn down and incurred on 1 January 2019, and was utilized as follows, with the remaining funds invested temporarily at a rate of 3% during the accounting period before these funds were required for spending. Asset A Asset B Ghc 000 Ghc 000 1 January 2019 250 500 1 July 2019 150 300 1 November 2019 100 200 Required i. Calculate the borrowing cost eligible for capitalization for each qualifying asset ii. Calculate the cost of each asset as at 31 December 2019.
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On 1 January 2019 Stremans Co. borrowed GHc 1.5 million at a rate of 8%
to finance the production of two assets, both of which were expected to take
a year to build. Work started during 2019. The loan facility was drawn down
and incurred on 1 January 2019, and was utilized as follows, with the
remaining funds invested temporarily at a rate of 3% during the accounting
period before these funds were required for spending.
Asset A Asset B
Ghc 000 Ghc 000
1 January 2019 250 500
1 July 2019 150 300
1 November 2019 100 200
Required
i. Calculate the borrowing cost eligible for capitalization for each qualifying
asset
ii. Calculate the cost of each asset as at 31 December 2019.
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