On 1 January 2019 Rodax plc borrowed 3 million to finance the production of two assets,...
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On 1 January 2019 Rodax plc borrowed £3 million to finance the production of two assets, both of which took a year to build. Work started during 2019. The loan facility was drawn down and incurred on 1 January 2019, and was used as follows, with the remaining funds invested temporarily. Asset A Asset B 500,000 1,000,000 1 January 2019 1 July The loan rate was 9% pa and Rodax plc can invest surplus funds at 7% pa. Required Calculate the borrowing costs which must be capitalised for each of the assets and consequently 500,000 1,000,000 2019 the cost of each asset. On 1 January 2019 Rodax plc borrowed £3 million to finance the production of two assets, both of which took a year to build. Work started during 2019. The loan facility was drawn down and incurred on 1 January 2019, and was used as follows, with the remaining funds invested temporarily. Asset A Asset B 500,000 1,000,000 1 January 2019 1 July The loan rate was 9% pa and Rodax plc can invest surplus funds at 7% pa. Required Calculate the borrowing costs which must be capitalised for each of the assets and consequently 500,000 1,000,000 2019 the cost of each asset.
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