PROBLEM 3: EXERCISES 1 On 1st May 20X1, DEF took a loan of P1,000,000 from a bank at the annual interest rate of 5%. The purpose of this loan was to finance construction started on 1 June 20X1. DEF temporarily invested P800,000 borrowed money during the months of June and July 20X1 at the rate of 2% p.a. construction of a production hall. The a Requirement: What borrowing cost can be capitalized in 20X1? (Assume all interest was paid). (Adapted)

PROBLEM 3: EXERCISES 1 On 1st May 20X1, DEF took a loan of P1,000,000 from a bank at the annual interest rate of 5%. The purpose of this loan was to finance construction started on 1 June 20X1. DEF temporarily invested P800,000 borrowed money during the months of June and July 20X1 at the rate of 2% p.a. construction of a production hall. The a Requirement: What borrowing cost can be capitalized in 20X1? (Assume all interest was paid). (Adapted)

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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QUESTION 1 : SPECIFIC BORROWINGS On 1 January 20X1 Bakti Bhd borrowed RM1.5m to finance the production of its plant, which was expected to take a year to build. Work started during 20X1. For the first quarter of 20X1, only RM700,000 was required for the construction of the plant. The remaining RM800,000 was only required from 1 April 20X1 onwards. Hence, from 1 Iyear Jan to 31 March 20X1, Bakti invested the remaining RM800,000 temporarily to earn some interest income. The loan rate was 7% and Bakti Bhd can invest surplus funds at 3%. Required Compute the borrowing costs which may be capitalised and consequently cost of the plant as at 31 December 20X1. MERS 123