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Part B Freesia Cooling Berhad manufactures air conditioners components. During the current year it started the building of a new plant in Nilai Industrial Park,
Part B Freesia Cooling Berhad manufactures air conditioners components. During the current year it started the building of a new plant in Nilai Industrial Park, Negeri Sembilan. Details regarding the construction of Freesia Cooling's new plant are as follow: The company issued a RM80 million unsecured loan with a coupon interest rate of 6% on 1 July 2019. The loan is redeemable at a premium which means the loan has an effective finance cost of 7.5% per annum. The loan was specifically issued to finance the building of the new plant which meets the definition of a qualifying asset in MFRS 123 Borrowing Costs. Construction of the plant commenced on 1 August 2019 and it was completed and ready for use on 31 May 2020, but did not open for business until 1 July 2020. During the year, trading at Freesia Cooling's other plants was below expectations so the company suspended the construction of the new plant for a two-month period during October and November 2019. Continued... The proceeds of the loan were temporarily invested for the month of July 2019 and earned interest of RM320,000. Year-end of Freesia Cooling is 30 June. Required: In accordance to MFRS 123 Borrowing Costs: a) Compute the net borrowing cost that should be capitalised as part of the cost of the new plant (3 marks) b) Compute the finance cost that should be reported in the statement of profit or loss and other comprehensive income for the year ended 30 June 2020. (2 marks)
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