Question
Apollo limited borrowed Gh1,000,000loan from bank with an interest rate of 10% which was equal to it's effective rate on 1 April 2015 for the
Apollo limited borrowed Gh1,000,000loan from bank with an interest rate of 10% which was equal to it's effective rate on 1 April 2015 for the construction of power generation facilities of the company. the loan was received on April and utilized by Gh300,000 on qualifying assest. On April 01, the company deposited the remaining amount in a bank yielding interest at 6% per annum. Whole of the amount is withdrawn and paid to contractor on 31st December 2015 when the construction was completed and ready for use. The company paid the loan to bank on 31 March 2016. Power generation facility was available for use in the business from 1 April 2016. Required: i. calculate the net borrowing cost that should be capitalized as part of the cost of the new store and the finance cost that should be reported in the statement of profit and loss for the year ended 31 March 2016 ii. show the extracts from statement of profit and loss for the year ended 31 March 2016 and statement of financial position as at 31 March 2016.
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