(a) Define the term ‘borrowing costs’ and explain the accounting treatment of such costs in accordance with IAS 23. 

(b) During the year ended 31 December 2009, an entity started work on the construction of a manufacturing plant and incurred expenditure as follows:

All of these payments were made out of general borrowings. Construction work was still underway at 31 December 2009. The entity had the following general borrowings outstanding throughout the year 2009. 

Calculate the amount of borrowing costs that may be capitalised for the construction of the manufacturing plant during the year.  

Transcribed Image Text:

1 April 2009 1 August 2009 1 December 2009 000 3,000 4,800 3,600