Benson Limited is constructing a Power Plant which was completed on 31st December 2019. The company obtained a bank loan of R1,000,000 at a rate of 15% per annum to construct the Power Plant on 1st January 2019. As of 31st December 2019, Benson Limited also had the following loans outstanding: I. 18% 5-year loan Note of R1,500,000 II. 14% Debentures of R1,000,000 Expenditures on the project were made as follows: I. On the 31st March 2019, R600,000 was incurred; II. R800,000 was incurred on 30th June 2019; III. The final expenditure incurred was R300,000 on 31st December 2019. During the year Benson Limited invested R400,000 of the bank loan for 2 months at an interest of 9% per annum. Required: Determine the amount of borrowing costs to be capitalized and expensed.
Benson Limited is constructing a Power Plant which was completed on 31st December 2019.
The company obtained a bank loan of R1,000,000 at a rate of 15% per annum to construct
the Power Plant on 1st January 2019. As of 31st December 2019, Benson Limited also had the
following loans outstanding:
I. 18% 5-year loan Note of R1,500,000
II. 14% Debentures of R1,000,000
Expenditures on the project were made as follows:
I. On the 31st March 2019, R600,000 was incurred;
II. R800,000 was incurred on 30th June 2019;
III. The final expenditure incurred was R300,000 on 31st December 2019.
During the year Benson Limited invested R400,000 of the bank loan for 2 months at an
interest of 9% per annum.
Required: Determine the amount of borrowing costs to be capitalized and expensed.
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