Kindly help me answer this 2 questions. this is all the details i have.

Question 1

During 2019 it was decided to undertake a substantial expansion programme. This expansion programme commenced in 2020 and details thereof are as follows:

Description	Amount	Financing
Land	N$ 500 000	80% mortgage loan at 18% p.a. by Panbank
Building	N$ 1 500 000	80% mortgage loan at 18% p.a. by Panbank80% mortgage loan at 18% p.a. by Panbank
Plant	N$ 2 000 000	100 % loan at 20% p.a. repayable over 5 years commencing 1 January 2022
Factory Equipment	N$ 500 000	Finance lease with annual instalments of N$200 000 each, payable in arrears over 4 years.

The bank capitalises interest on the above loans at the end of the company's financial year. The assets were acquired as follows: Land: Payment on transfer on 1 February 2020. Buildings: Commencement of construction activities on 1 February 2020. Progress payments: 30 April 2020 N$ 500 000 31 July 2020 N$ 250 000 31 October 2020 N$ 250 000 31 January 2021 N$250 000 30 April 2021 N$ 250 000 completion of building - 1 May 2021. Cash on hand is used to make 20% of each payment in respect of land and buildings. Plant: The plant will be brought into use on 1 May 2021 but payment to the foreign supplier will be made on shipment of the plant on 31 January 2021. Funds from the N$2 000 000 loan are available from this date in order to finance the purchase. Factory equipment: The supplier of the equipment undertook to deliver the equipment on 1 April 2021. The finance lease agreement will be concluded on the same date. This equipment will also be brought into use on 1 May 2021. Page 17 of 20 Required:

1.3 Prepare the journal entry to capitalise borrowing costs on land and buildings for 2020.

QUESTION 2 Part a Dunlop Tyres (Pvt) Ltd (Dunlop) has an agreement to provide 100 000 truck tyres to a once-off customer at a fixed price over two years. At the end of the first year, after providing 50 000 truck tyres to the customer, the price of the raw materials used increased unexpectedly. Dunlop was unable to renegotiate the sales price with its customer and would have to pay a penalty of $500 000 if it cancels the contract. It is expected that the remaining truck tyres will be delivered twelve months after the reporting date for a total price of N$3.5 million. The total cost of producing the truck tyres measured at the same point in time is expected to be N$4.1 million. Assume that a discount rate of 10% per annum before tax is appropriate. On 15 December 2020 the board of Dunlop decided to close down its Fine Tubes division. Before the reporting date (31 December 2020), the decision was not communicated to any of those affected and no other steps were taken to implement the decision. Concurrently, on 15 December 2020 the board of Dunlop decided to close down its Repairs and alignment division. On 22 December 2020 a detailed plan for closing down the division was agreed upon by the board; letters were sent to customers warning them to seek an alternative source of supply, and redundancy notices were sent to the staff of the division. The entity Dunlop has also diversified and constructed an oil rig which is due to become operational on 1st January Year 1. The entity had promised that when the oil rig is eventually decommissioned it will restore the sea bed and clean up any contamination that it has caused. It is estimated that the cost of decommissioning of the oil rig will be sold N$8m and that decommissioning will take place in 10 years time. The risk free cost of capital for the company is 10% post tax. The oil rig is depreciated on a straight line basis over its economic life. Required: 2.3 Explain how the cost of decommissioning the oil rig should be treated in the financial statements for the year ended 31 December Year 1. ( IAS 37) 15 marks