QUESTION ONE ( 3 0 MARKS ) Ricardo Limited is constructing a Power Plant which was completed
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Question:
QUESTION ONE MARKS
Ricardo Limited is constructing a Power Plant which was completed on st December The company obtained a bank loan of R at a rate of per annum to construct the Power Plant on st January As of st December Ricardo Limited also had the following loans outstanding:
year loan Note of R
Debentures of R
Expenditures on the project were made as follows:
On the st March R was incurred;
R was incurred on th June ;
The final expenditure incurred was R on st December
During the year Ricardo Limited invested R of the bank loan for months at an interest of 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.
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