b) According to IAS 23, Borrowing Costs, certain borrowing costs have to be capitalized. Explain with...

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b) According to IAS 23, Borrowing Costs, certain borrowing costs have to be capitalized. Explain with reference to the above IAS how interest should be capitalized (4 marks) c) Galina Construction Limited acquired a loan for $40 million on 1 January 2020 to begin the construction of a bridge. The loan was acquired from Globe Bank at a nominal interest rate of 12% and an effective interest rate of 14%. Construction did not begin on the bridge until, 1 February 2020 and was completed and ready for use on 31 December 2020. The company invested $15 million of the funds received from the bank over the period 1 January to 30 June 2020 at an interest rate of 9 %. During the months of July and September 2020 construction on the project was suspended. REQUIRED: For the year ended 31 December 2020 show the following: 1. The Statement of Comprehensive Income Extract for the year (4 marks) 2. The Borrowing cost to be capitalized on the Statement of Financial Position (6 marks) b) According to IAS 23, Borrowing Costs, certain borrowing costs have to be capitalized. Explain with reference to the above IAS how interest should be capitalized (4 marks) c) Galina Construction Limited acquired a loan for $40 million on 1 January 2020 to begin the construction of a bridge. The loan was acquired from Globe Bank at a nominal interest rate of 12% and an effective interest rate of 14%. Construction did not begin on the bridge until, 1 February 2020 and was completed and ready for use on 31 December 2020. The company invested $15 million of the funds received from the bank over the period 1 January to 30 June 2020 at an interest rate of 9 %. During the months of July and September 2020 construction on the project was suspended. REQUIRED: For the year ended 31 December 2020 show the following: 1. The Statement of Comprehensive Income Extract for the year (4 marks) 2. The Borrowing cost to be capitalized on the Statement of Financial Position (6 marks)

Answer rating: 100% (QA)

B The core principle of IAS 23 Borrowing Costs is that you should capitalize borrowing costs if they are directly attributable to the acquisition cons... View the full answer