P10.6 (LO 2) (Borrowing Costs) Cho Landscaping began construction of a new plant on December 1, 2022 (all amounts in thousands). On this date, the company purchased a parcel of land for ¥139,000 in cash. In addition, it paid ¥2,000 in surveying costs and ¥4,000 for a title insurance policy. An old dwelling on the premises was demolished at a cost of ¥3,000, with ¥1,000 being received from the sale of materials. Architectural plans were also formalized on December 1, 2022, when the architect was paid ¥30,00o. The necessary building permits costing ¥3,000 were obtained from the city and paid for on December 1 as well. The excavation work began during the first week in December with payments made to the contractor in 2023 as follows. Date of Payment Amount of Payment March 1 ¥240,000 Мay 1 330,000 July 1 60,000 The building was completed on July 1, 2023. To finance construction of this plant, Cho borrowed ¥600,000 from the bank on December 1, 2022. Cho had no other borrowings. The ¥600,00o was a 10-year loan bearing interest at 8%. Excess funds from the loan were invested during 2022 and earned ¥2,000. During 2023, the excess funds from the loan earned ¥1,000. Instructions

Q: What is the importance of proper loan documentation?

A: Loan documentation are documents that lenders request from borrowers for the purpose of providing…

Q: Why is it necessary to make a distinction between Capital and Revenue Receipts and Capital and…

A: Capital receipts: These receipts are income that is earned from the investment and financing…

Q: Do I have to include depreciation when computing net present value?

A: Depreciation is said to be none cash expense so there is no out flow of cash when depreciation…

Q: What is an accrued expense? Provide an example.

A: Accrued expense: This is the expense incurred but not yet paid. It is treated as liability until the…

Q: what types of investments generate interest income and how is interest income reported?

A: When a person makes an investment then that person will earn a return or an income on that…

Q: Are there any particular elements to interest-bearing transactions

A: There any particular elements to interest-bearing transactions will be explained:

Q: would the return on as

A: Return on Assets is net income divided by the average total assets

Q: In general terms, what is the Capital AssetPricing Model (CAPM)? What assumptions weremade when it…

A: CAPM: The capital asset pricing model (CAPM) is a method utilized to determine a hypothetically…

Q: How do you accrue and calculate interest

A: interest calculation = principle amount * rate of interest    accrued interest is interest…

Q: When do prepayments occur? Accruals?

A:

Q: Should options given as part of compensationpackages be reported on the income statement asan…

A: Stock options are recognized as a compensation expense in the financial statements of a company.…

Q: Differentiate between Current Account vs Capital Account.

A: Account: A record, that documents or records the changes in assets, liabilities, or equity for a…

Q: ccounting" What are you looking for in terms of compensation and benefits?

A: Accounting is the process of measuring, processing, and communicating financial information about an…

Q: When should an expenditure be recorded as an asset rather than an expense? O Never O When future…

A: Lets understand the basics.When any expense which is going to have future benefits needs to…

Q: What is the purpose of the accrual tranche?

A: The diverse CMO bunches are known as a tranche. Gathering tranche too known as Z tranche is the…

Q: What are the various forms of interest-bearing transactions

A: The various forms of interest-bearing transactions of explanation:

Q: Identify if the following financial inputs are relevant or irrelevant and motivate why you have…

A: In financial decision making, relevant costs are costs that will be affected by the decision at…

Q: What examples can be used for the client on the advantages of the accrual method?

A: Accrual basis accounting recognizes business revenue and matching expenses when they are…

Q: What factors need to be considered in determining whether a receipt is of an income or of a capital…

A: The essential distinction between Capital Receipt and Income is the "purpose" with which the asset…

Q: How are deductions and losses different? How are they similar? Explain

A: Deductions: As deductions, the existing expenses made for the development of current period profits…

Cost of Credit

The cost of credit is an extra amount that the borrower has to pay besides the loan amount. These credit charges may vary from loan to loan. The cost of credit includes interest charges, maintenance charges, and arrangement charges. Some of the costs are mandatorily collected by the lender based on the loan amount and tenure of the loan. The cost of credit is also called finance charges of the credit.