Question
On 1 January 2019 Nacho plc had in place $500,000 of 6.0% pa loan finance and $800,000 of 4.7% pa loan finance. Neither loan was
On 1 January 2019 Nacho plc had in place $500,000 of 6.0% pa loan finance and
$800,000 of 4.7% pa loan finance. Neither loan was taken out for a specific purpose. On
1 February 2019 the company began to construct a new office building, which was
funded by this existing loan finance. The building was correctly assessed as a qualifying
asset, was completed and available for use on 31 October 2019, and has an estimated
total useful life of 50 years. The company moved its administrative function into this
building on 31 December 2019. The accountant included the interest payable for the
whole year on the total loan finance as part of the cost of the office building of $650,000
within property, plant and equipment. He did not recognise any depreciation on this
building in the year ended 31 December 2019 because the staff did not move to the new
building until the last day of the year.
Explain the required IFRS financial reporting treatment of the
above in the financial statements of each company. Submit all relevant
calculations and set out the required adjustments in the form of journal entries.
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