1)On 1 July 2019ReginaLtd borrowed$200,000 at 6% pa to fund the construction of anew warehouse, a qualifying asset. The cash received was immediately placed ondeposit earning interest at 2% pa. Construction did not begin until 1 August 2019due todelays in agreeing the plans with the architects.

A construction payment of$120,000 was made on 1 August 2019and the remaining$80,000 paid on 1 May 2020. The warehouse was ready for use on 1 June 2020butReginaLtd did not start to use it until 1 July 2020. The directors estimate that thewarehouse has a useful life of 10 years.

ReginaLtd recognised the net interest in the statement of profit or loss for the yearended 30 June 2020. The construction costs were included in assets in the course ofconstruction in the statement of financial position as at 30 June 2020. No depreciation ischarged on assets in the course of construction.

Explain the required IFRS financial reporting treatment of Issues above in the financial statements ofeach company. Prepare relevant calculations and set out the required adjustments in the form of journal entries.