Q1

An entity capitalises borrowing costs on the construction of property, plant and equipment (PPE). On 1 July 2015, the entity purchased land for the construction of a new factory and borrowed 10 million at 9% annual interest on that date to finance the construction. Construction commenced on 1 August 2015, and the factory was complete and ready for use on 1 March 2016. Production started in the factory on 1 May 2016.

How much interest can be capitalised in PPE as a result of this construction in the year ended 30 June 2016?

Group of answer choices

75,000

525,000

900,000

750,000

Q2

An entity purchased an asset for an invoiced amount of 20 million, net of a trade discount of 5 million. The asset was used in a jurisdiction that imposed a legal requirement on users to dismantle such assets at the end of their useful economic lives and dispose of them safely. The entity estimates that the present value of the cost of dismantling the asset at the end of its useful life is 4 million. The entity paid for the asset promptly and qualified for a settlement discount of 1 million.

What is the amount that should be included as the cost of property, plant and equipment under the provisions of IAS 16 Property, Plant and Equipment?

Group of answer choices

4,000,000

24,000,000

20,000,000

25,000,000