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A. Undeniably, profitability is the ultimate goal of companies and readers of a companys financial statements are very much interested in the reported profit figure.

A. Undeniably, profitability is the ultimate goal of companies and readers of a company’s financial statements are very much interested in the reported profit figure. The profit figure is achieved by the preparation of the statement of profit or loss and the statement of financial position. If the for egoingis the case, why then bother about the statement of cash flows?

B. Globally, accounting standards are developed based on different methods. It is generally agreed that the nature of accounting standards depends on the systems of regulation. It has been argued that there are two main systems of regulation.

Required:

Identify and explain the difference between the two systems of regulation, stating clearly which system you believe describes the International Financial Reporting Standards (IFRS)

C. On 1st January 2018, Global Drilling Ltd entered into a GHS22million contract for the construction of an office complex at Tema. The building was completed at the end of December 2018. During the period, the following payments were made to the contractor:

Payment date
Amount

GHS’m
1 January 2018
2.00
31 March 2018
6.00
30 September 2018
12.00
31 December 2018
2.00

22.00

Global Drilling’s borrowings as at its year end of 31st December 2018 were as follows:
 10% 4-year Loan Note with simple interest payable annually, which relates specifically to the building project, loans outstanding at 31st December 2018 amounted to GHS7,000,000. Interest of GHS700,000 was incurred on these borrowings during the year, and interest income of GHS200,000 was earned on these funds while they were held in anticipation of payments.
 12.5% Five-year Loan Note with simple interest payable annually; debt outstanding at 1st January 2018 amounted to GHS10,000,000 and remained unchanged during the year.
 10% Five-year Loan Note with simple interest payable annually; debt outstanding at 1st January 2018 amounted to GHS15,000,000 and remained unchanged during the year
Required:
Calculate the borrowing costs to be capitalised.

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