Reference no: EM132822787

FAR510 - Financial Accounting and Reporting Question -

Construction of Mia & Syad's Bakery's new store begin on 1 April 2019. The costs were incurred on the construction immediately. The store was completed on 1 January 2020 and brought into use for its grand opening on the 1 April 2020. Mia & Syad's Bakery secured a RM2,500,000 5-years loan on 1 April 2019 to aid construction of the new store (which meets the definition of a qualifying asset as per MFRS 123). The loan carried an interest rate of 8% per annum. Costs incurred on the construction of the new store (excluding interest) is RM3,000,000.

Q1. Calculate the amount of interest that shall be included in the costs of the new store project.

a) RM200,000

b) RM180,000

c) RM150,000

d) RM1,000,000

Q2. Determine the revised carrying amount of the new store project upon its completion.

a) RM3,000,000

b) RM5,500,000

c) RM3,150,000

d) RM3,200,000

Q3. Investment income generated from loans taken in order to finance a qualifying asset should be:

a) deducted from borrowing costs

b) added to borrowing costs

c) added to cost of asset

d) none of the above