OUESTION $3[28$ marks$]$

a$)$ Explain giving an example what is meant by the impairment of an asset.

$(6$ marks$)$

b$)$ Cashew Limited runs a unit that suffers a massive drop in income due to the failure of its technology on $1$ January $2019.$ The following carrying values were recorded in the books immediately prior to the impairment:

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PART B

Manchester Construction Company $($MCC$)$ borrowed $$40,000,000$ from the Prime National Bank on the January $1,2019$ to assist with funding of a new commercial property in Montego Bay. The coupon interest rate on the loan was $12\%,$ but the effective interest rate was $15\%$ :

The loan was received on January $1,2019$ but construction did not start on the project until April $1,2019.$ On February $1,2019$ MCC invested $$20,000,000$ until $31$ July $2019$ and received interest income at an annual rate of $10\%.$ Construction was suspended for the month of August $2019.$

The project was completed and ready for use on the $31$ December $2019.$

REQUIRED:

a$)$ The Statement of Comprehensive Income extract for the year ended $31$ December $2019$

$(8$marks$)$

b$)$ The Statement of Financial Position extract as at the $31$ December $2019$

$(3$marks$)$

c$)$ Explain the period of time over which borrowing cost should be calculated

$(4$ marks$)$