QUESTION ONE $(30$ MARKS$)$

Ricardo Limited is constructing a Power Plant which was completed on $31$st December $2023.$ The company obtained a bank loan of R$1,000,000$ at a rate of $15\%$ per annum to construct the Power Plant on $1$st January $2023.$ As of $31$st December $2023,$ Ricardo Limited also had the following loans outstanding:

$18\%5-$year loan Note of R$1,500,000$

$14\%$ Debentures of R$1,000,000$

Expenditures on the project were made as follows:

On the $31$st March $2023,$ R$600,000$ was incurred;

R$800,000$ was incurred on $30$th June $2023$;

The final expenditure incurred was R$300,000$ on $31$st December $2023.$

During the year Ricardo Limited invested R$400,000$ of the bank loan for $2$ months at an interest of $9\%$ per annum.

Required:

$$ Define Borrowing costs and the accounting standard

$$ When do you capitalise costs and when are they expenses?

$$ Determine the amount of borrowing costs to be capitalized and expensed.