1. In relation to IAS23, answer the following scenarios:

Scenario (1)

On the 1^st July 2020, Breezi plc borrowed 3m for a term of one year, exclusively to finance the construction of a new building. The interest rate on the loan is 5% and is payable on maturity of the loan. Construction commenced on 1^st August 2020. Construction was suspended in December 2020 due to employees holiday leave. The building was available for use on 31^st May 2021 having a total construction cost of 2.8m. Buildings are depreciated at a rate of 2.5% per annum and charged on a monthly basis commencing on the date that the building is ready for use.

Required

Calculate the carrying amount of the building in Breezi statement of financial position as at 30^th June 2021. (8 marks)

Scenario (2)

On 1^st November 2020, Joleen plc hired a construction firm to construct a showroom for its business. The total construction costs were 1.6m. Joleen financed the first 500,000 out of the companys cash resources and borrowed 1.1m at 4% per annum to cover the remaining construction costs. The loan was drawn down in stages as the builder completed stages of work as follows:

31^st December 2020 600,000

31^st March 2021 500,000

30^th June 2021 400,000

31^st August 2021 Balance of construction costs

Construction was completed on 30^th September 2021.

Required

Calculate the carrying amount of the plant in Joleen statement of financial position as at 31^st October 2021.

1. In relation to IAS23, answer the following scenarios:

Scenario (1)

On the 1^st July 2020, Breezi plc borrowed 3m for a term of one year, exclusively to finance the construction of a new building. The interest rate on the loan is 5% and is payable on maturity of the loan. Construction commenced on 1^st August 2020. Construction was suspended in December 2020 due to employees holiday leave. The building was available for use on 31^st May 2021 having a total construction cost of 2.8m. Buildings are depreciated at a rate of 2.5% per annum and charged on a monthly basis commencing on the date that the building is ready for use.

Required

Calculate the carrying amount of the building in Breezi statement of financial position as at 30^th June 2021. (8 marks)

Scenario (2)

On 1^st November 2020, Joleen plc hired a construction firm to construct a showroom for its business. The total construction costs were 1.6m. Joleen financed the first 500,000 out of the companys cash resources and borrowed 1.1m at 4% per annum to cover the remaining construction costs. The loan was drawn down in stages as the builder completed stages of work as follows:

31^st December 2020 600,000

31^st March 2021 500,000

30^th June 2021 400,000

31^st August 2021 Balance of construction costs

Construction was completed on 30^th September 2021.

Required

Calculate the carrying amount of the plant in Joleen statement of financial position as at 31^st October 2021.