On 1 January 20X5 Company A commenced the construction of a new office building. The office building was completed on 31 December 20X5. To fund the construction of the building, Company A used both specific borrowings and general borrowings. On 1 January 20X5 Company A obtained a five-year 10 per cent loan of €800,000. This loan was obtained specifically for

Chapter 12, Exercises #18

On 1 January 20X5 Company A commenced the construction of a new office building. The office building was completed on 31 December 20X5. To fund the construction of the building, Company A used both specific borrowings and general borrowings. On 1 January 20X5 Company A obtained a five-year 10 per cent loan of €800,000. This loan was obtained specifically for the purpose of funding the construction of the new office building. During 20X5 interest of €80,000 was incurred on the €800,000 loan. On 1 January 20X5 Company A’s general borrowings included a ten-year 8 per cent loan of €1,800,000 and a ten-year 11 per cent loan of €1,500,000. The debt outstanding on the three loans remained unchanged throughout the year. During 20X5 the following payments were made to the building contractor hired to construct the new office building: 


Required:

Calculate the amount of borrowings costs that Company A should capitalize for the period to 31 December 20X5.

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Related Book For answer-question

International Financial Reporting And Analysis

8th Edition

Authors: David Alexander, Ann Jorissen, Martin Hoogendoorn

ISBN: 9781473766853