Zephyr Ltd began the construction of a long-term asset on 1 November 2020. On 1 December...

 

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Zephyr Ltd began the construction of a long-term asset on 1 November 2020. On 1 December 2020, it borrowed $7 million at an annual interest rate of 10% to fund the project. On 15 January 2021, a labor strike halted work until the dispute was resolved on 15 February 2021. The project was still underway as of 30 September 2021, with an anticipated completion date of 1 October 2022. Interest was paid monthly in arrears. Required: Provide an explanation, along with a journal entry, on how the borrowing costs for the year ended 30 September 2021 should be accounted for, in line with HKAS23. Zephyr Ltd began the construction of a long-term asset on 1 November 2020. On 1 December 2020, it borrowed $7 million at an annual interest rate of 10% to fund the project. On 15 January 2021, a labor strike halted work until the dispute was resolved on 15 February 2021. The project was still underway as of 30 September 2021, with an anticipated completion date of 1 October 2022. Interest was paid monthly in arrears. Required: Provide an explanation, along with a journal entry, on how the borrowing costs for the year ended 30 September 2021 should be accounted for, in line with HKAS23.

Answer rating: 100% (QA)

According to HKAS 23 Borrowing Costs borrowing costs that are directly attributable to the acquisiti... View the full answer