Question 2 (a) Awan Bhd constructed a building on 1 January 2021. The building was completed on 31 December 2021.Construction costs (excluding interest) incurred on the building was RM3 million. Awan Bhd secured a loan of RM2 million from Pelangi Financing Bhd on 1 January 2021 to finance the construction costs. Interest on the loan was charged at 5% per annum. Since Awan Bhd did not need the full amount for the loan in the first quarter of the construction, it deposited RM800,000 in a fixed deposit which yielded an interest of 2% per annum. Required: i. Compute fotal borrowing costs to be capitalized for construction of the building for financial year ended 31 December 2021.
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- Salmah Bhd constructed a building on 1 Jan 2017. The building was completed on 31st December 2019. Construction cost (excluding interest) incurred on the building was RM 1,500,000. +150 000 Salmah Bhd secured a loan of RM 1,000,000 from Sheila Finance Bhd to finance the construction costs at 10% interest rate per annum. Repayment period of loan was 5 years. Since Salmah Bhd did not need the full amount of the loan in the 1st 5 year of the construction, it deposited RM 600,000 in fixed deposit which yielded an interest 8% per annum. The deposit matured on 31st December 2017. The company policy is to capitalised borrowing costs as part of the cost of assets. The useful life of building was estimated to be 50 years. You are required: a) Calculate the cost of building b) Show the income statement (extract) for the years ended 31 December 2017 until 31st December 2020.Question 6 The following events occurred during the year ended 30 June 2020 for Electrical Limited. On 1 June 2020, Electrical Ltd. signed a three-month 12% per annum note payable to purchase a new equipment costing $48,000. Interest and principal are paid at maturity. On 29 June 2020, Electrical Ltd. received deposit in advance of $12,000 from a construction company for completing the electrical work for a new project during the next 6 months. Electricity charges of $40,000 from 24 April to 23 June are payable on 10 July. Electrical’s main product is backed by warranty. Sales of this product for the year totalled $445,000. The opening balance of provision for warranty claims was $10,600. During the year, Electrical’s warranty expense was $31,700 and claims paid to customers totalled $25,200. June sales totalled $212,000. Electrical Ltd. collected GST of…Question 2 A business is preparing its financial statements for the year end 31 December 2021 and has the following items it needs to consider: i) Development costs of £600,000 were capitalised in the statement of financial position two years ago, on 1 January 2020, and are being amortised over 4 years from that date. Tax relief was provided in full as the costs were incurred. ii) A penalty of £2,000 was incurred in June 2021 for the late filing of a tax return. Payment was made in July 2021. Penalties are not an allowable deduction for tax purposes. iii) At 31 December 2021 land, held within PPE, was revalued from its cost of £1.7 million to £2.4 million. The revaluation gain is taxable on disposal of the asset. iv) The taxable profit for the year to 31 December 2021 is £8 million. £600,000 of income tax is outstanding at the year end and is due for payment by 30 September 2022. Tax is payable at 20% in the years ending 31 December 2020 and 2021. Required: Briefly outline the tax…
- 15. LIME Co. decided to construct a building to expand its operations. The entity decided to obtain a 5-year loan from MAROON Bank for P10,000,000 at 12% on December 31, 2019, to finance the construction of the building. The construction started on January 2, 2020, and the building was completed on December 31 of the same year. Payments were made as follows: January 2 – P1,500,000; April 1 – P2,000,000; June 1 – P2,100,000; October 1 – P1,700,000; December 1 – P2,200,000. How much borrowing cost shall be capitalized? * a. ₱ 1,100,000 b. ₱ 1,140,000 c. ₱ 580,000 d. ₱ 1,200,000QUESTION 2 On 1 September 2017, Seven Food Bhd purchased a packaging machine under hire purchase agreement with Tujuh Todak Bhd. The cash price of the machine was RM104,800 and the interest charged was 7% per annum. Seven Food Bhd paid 30% of the cash price as a deposit. The hire purchase period was 24 months and the instalments are paid at the end of each month starting 30 September 2017. The economic life of the machine was 7 years and Seven Food Bhd used straight line method to depreciate the machine. Seven Food Bhd and Tujuh Todak Bhd close their accounts on 31 December every year. Seven Food Bhd used gross method to account for the hire purchase and employed sum-of-the-years digits method to recognise the interest expense on the instalment payment date. In April 2018, Seven Food Bhd faced financial difficulties in settling their debts. The company was unable to pay the hire purchase instalments for April and May 2018. After serving “the notice of intention to repossess” to Seven…LIME Co. decided to construct a building to expand its operations. The entity decided to obtain a 5-year loan from MAROON Bank for P10,000,000 at 12% on December 31, 2019, to finance the construction of the building. The construction started on January 2, 2020, and the building was completed on December 31 of the same year. Payments were made as follows: January 2 – P1,500,000; April 1 – P2,000,000; June 1 – P2,100,000; October 1 – P1,700,000; December 1 – P2,200,000. How much borrowing cost shall be capitalized? * ₱ 580,000 ₱ 1,140,000 ₱ 1,200,000 ₱ 1,100,000
- Question 1 The following events occurred in December 2020 at SNL, a hockey equipment manufacturer. The company prepares its financial statements annually at the end of December. Also on 1 December SNL paid $50,000 for a truck. The truck has a 5 year expected useful life and an estimated $20,000 salvage value. The company’s policy is to amortize capital assets on a straight line basis. Amortization is recorded monthly. On 5 December, SNL received a large order for hockey sticks from a retail chain along with a cheque for $45,000 representing half payment. There is currently a shortage of hockey sticks and the retailer wants to be sure of delivery as soon as possible after Christmas. SNL has advised the retailer that the hockey sticks have not yet been manufactured but will be shortly. SNL expects to ship them in the second week of January, On 10 December, SNL paid a dividend to shareholders in the amount of $75,000. On 15 December, SNL reviewed its accounts receivable. Before…1- On November 1, 2018, Almadinah Company contracted Pfeifer Construction Co. to construct a building for $1,400,000 on land costing $100,000 (purchased from the contractor and included in the first payment). Almadinah made the following payments to the construction company during 2019. January,1 200,000 March, 31 310,000 May, 31 550,000 December,1 440,000 Total 1,500,000 Almadinah Construction completed the building, ready for occupancy, on December 31, 2019. Salalah had the following debt outstanding at December 31, 2019. Specific Construction Debt 1. 15%, 3-year note to finance purchase of land and construction of the building, dated December 31, 2018, with interest payable annually on December 31 760,000 Other Debt 2. 10%, 5-year note payable, dated December 31, 2015, with interest payable annually on December 31 560,000 3. 12%, 10-year bonds…3. Ali Company borrowed OMR50, 000 in December 2019 for a period of three months from Azzan and will make its interest payment three months later. The total interest for the three months will be OMR 1500. At the end of the year 2019 in the financial statement, the company reported Interest Expense of OMR 500 in Income Statement. a. This action was the result of which accounting principle? Explain. b. Do you think, the borrowed money will increase the assets/ Liabilities of the business? Yes/ No Justify your answer
- QUESTION THREE On 1 January 2011, Godson Ltd entered into a GHC11,000,000 contract for the construction of an office complex in Kumasi. The building was completed at the end of December 2011. During the period, the following payments were made to the contractor; Payment Date Amount (GHC'000) 1 January 2011 1,000 31 March 2011 3,000 30 September 2011 6,000 31 December 2011 1,000 Total 11,000 Godson's borrowings as at its year end of 31 December 2011 were as follows ; 10% 4 years Loan Note with simple interest payable annually, which relates specifically to the building project; debts outstanding at 31 December 2011 amounted to GHC3,500,000. Interest of GHC325,000 was incurred on these borrowing during the year, and interest income of GHC100,000 was earned on these funds while they were held in anticipation of payment.12.5% Five-year Loan Note with Simple interest payment annually; debt outstanding at 1 January 2011 amounted to GHC5,000,000 and remained unchanged during the year.10%…QUESTION ONE You have been provided with the following Trial Balance for Jojo & Lulu Ltd. Jojo & Lulu Ltd Trial balance as at 31st March 2020 Dr Cr K K Bank 1,200.00 Share capital 30,000.00 Cash 400.00 Long term loan 15,000.00 Insurance 2,000.00 Office expenses 15,000.00 Fixtures and Fittings 30,000.00 Accumulated depreciation - Fixtures and Fittings on 1 April 2019 10,000.00 Provision for bad and doubtful debts as at 1 April 2019 5,000.00 Purchases 60,000.00 Salaries 25,000.00 Sales 93,600.00 Stock at 1 April 2019 15,000.00 Accounts Payable 13,000.00 Accounts Receivable 18,000.00 166,600.00 166,600.00 Additional Information…EEE Co. decided to construct a building to expand its operations. The entity decided to obtain a 5-year specific loan from EFF Bank for $10,000,000 at 12% on December 31, 2018, to finance the construction of the building. The construction started on January 2, 2019 and the building was completed on December 31 of the same year. Payments were made as follows: January 2-$1,500,000 April 1 $2,000,000 June 1- $2,100,000 October 1- $1,700,000 December 1 -$2,200,000. What is the intial cost of the building? Can you please show me a solution to get the answer?