Solution-Calculate the net borrowing cost

Calculate the net borrowing cost

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Reference no: EM133089364

Question - On 1 April 2020, Apollo Berhad made a RM1,000,000 loan from the bank at an interest rate of 10 percent, equal to its effective interest rate for the development of the company's power generation facilities. On 1 April, the loan was obtained and RM300,000 was used on qualifying properties. On 1 April, the company deposited the remaining balance at a rate of 6% per annum in a bank yielding interest. On 31 December 2020, when the construction was finished and ready for use, the full amount was withdrawn and paid to the contractor. On 31 March 2021, the company returned the loan to the bank. As of 1 April 2021, power generation facilities were eligible for use in the undertaking.

Required -

(a) Calculate the net borrowing cost that should be capitalised as part of the cost of the new store and the finance cost that should be reported in the income statement for the year ended 31 March 2021.

(b) Show the extracts from the income statement for the year ended 31 March 2021 and the statement of financial position as at 31 March 2021.

Reference no: EM133089364

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Calculate the net borrowing cost

Reference no: EM133089364

Reference no: EM133089364

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