Company X PLC has the following general borrowings outstanding throughout the year to 30th June 2019 (company's financial year end): (i) £500,000 bank loan with 5.5% Interest rate; (ii) £450,000 bank loan with 7% interest rate; (iii) £700,000 bank loan with 9.5% interest rate; and (iv) £350,000 bank loan with 10% interest rate. On 1st October 2018, the company began construction of a qualifying asset and incurred expenditure of £200,000. A further £300,000 was also spent on 1st of February 2019. Finally, a last expenditure of £150,000 was spent on 1st April 2019. All three expenditures were made by using the existing general borrowings. You are required to calculate the amount of borrowing costs that should be capitalised as part of the qualifying asset during the financial year ending 30th June 2019. In case you are rounding up, please select the closest option to your answer.

Company X PLC has the following general borrowings outstanding throughout the year to 30th June 2019 (company's financial year end): (i) £500,000 bank loan with 5.5% Interest rate; (ii) £450,000 bank loan with 7% interest rate; (iii) £700,000 bank loan with 9.5% interest rate; and (iv) £350,000 bank loan with 10% interest rate. On 1st October 2018, the company began construction of a qualifying asset and incurred expenditure of £200,000. A further £300,000 was also spent on 1st of February 2019. Finally, a last expenditure of £150,000 was spent on 1st April 2019. All three expenditures were made by using the existing general borrowings. You are required to calculate the amount of borrowing costs that should be capitalised as part of the qualifying asset during the financial year ending 30th June 2019. In case you are rounding up, please select the closest option to your answer.

Financial Accounting

14th Edition

ISBN:9781305088436

Author:Carl Warren, Jim Reeve, Jonathan Duchac

Publisher:Carl Warren, Jim Reeve, Jonathan Duchac

Chapter14: Long-term Liabilities: Bonds And Notes

Section: Chapter Questions

Problem 11E

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