Goodway Ltd, a construction company, arranged for a loan with GSB Bank to enable the company construct
Question:
Goodway Ltd, a construction company, arranged for a loan with GSB Bank to enable the company construct a new classroom block in Daakye. Goodway Ltd will be allowed to borrow up to GH₵4,500,000. The bank charges interest at the rate of 28% per annum and Goodway Ltd is able to invest any surplus funds at the rate of 22%.
Goodway Ltd borrowed GH₵2,700,000 on 1/1/13, and immediately invested GH₵1,200,000. On 30/6/13 the company liquidated GH₵750,000 of their investment to pay for construction materials. On 1/10/13, the company borrowed further GH₵1,800.00 of which GH₵450,000 was invested. On 1/12/13, work on the project was stopped because of a strike action by the workforce. The work recommenced on 1/2/14, and the company spent the rest of the loan in completing the project which was finally inspected on 31/7/14.
Required:
Calculate the carrying value of the classroom block as at 31/7/14 in accordance with IAS 23 Borrowing costs. (Round all figures to the nearest GH₵000.)
Advanced Financial Accounting
ISBN: 978-0137030385
6th edition
Authors: Thomas Beechy, Umashanker Trivedi, Kenneth MacAulay