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DDT Ltd is engaged in the production and distribution of executive clothing and has a large workforce. In December 2017, management resolved to source for
DDT Ltd is engaged in the production and distribution of executive clothing and has a large workforce. In December 2017, management resolved to source for medium term facility to build a staff canteen in order to help curb many incidents of truancy blamed on search for food. A cheque of GHC150,000 has been received from Progressive Lenders on 19 January 2018 and work on the canteen project started immediately. Additional information i. The medium-term facility is at a cost of 22% per annum but there is an agreement to reinvest temporary idle funds @ 16% provided it is not deliberate strategy to trade in finance The loan and accrued interest are repayable in four equal installments with effect from 31st March 2019. The building was completed and delivered to the company on 31st December 2018 iv. Interim certificates were presented by the contractor for payment during the year as follows: GHC Certificate No.1 dated 30/06/2018 58,000 Certificate No.2 dated 30/09/2018 48,500 Certificate No.3 (final certificate) dated 31/12/2018 43,500 The scheduled payments were programmed at the inception of the contract Required: In accordance with IAS 23 (Borrowing Costs) a. Compute the borrowing cost to capitalize at the end of the 2018 financial year b. Determine the total cost of the canteen to be recognized the books of DDT Ltd at the end of the 2018
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