PROBLEM 1(Borrowing CostConcepts IAS 23)

For the following independent scenarios/cases, identify whether the entity can capitalize borrowing cost:

a)An entity acquired school supplies intended for sale in anticipation of the demand that would arise as a result of the start of classes. Because the entity didnt have enough money, they decided to apply for a short-term loan with a bank and incurred interest/borrowing costs.(par. 7)

b)An entity borrowed money to finance the importation of flour from India. The entity uses flour as one of its ingredient in the production of bread, cakes and donut which are sold to its customers. (par. 7)

c)An entity incurred borrowing costs to finance the production of inventories that have a long production period (e.g. wine, cheese or whiskey that matures in bottle orcask for a long period of time). (Par. 4)