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Question 2 (a) Zephyr Ltd began the construction of a long-term asset on 1 November 2020. On 1 December 2020, it borrowed $7 million at
Question 2 (a) Zephyr Ltd began the construction of a long-term asset on 1 November 2020. On 1 December 2020, it borrowed $7 million at an annual interest rate of 10% to fund the project. On 15 January 2021, a labor strike halted work until the dispute was resolved on 15 February 2021. The project was still underway as of 30 September 2021, with an anticipated completion date of 1 October 2022. Interest was paid monthly in arrears. Required: Provide an explanation, along with a journal entry, on how the borrowing costs for the year ended 30 September 2021 should be accounted for, in line with HKAS23. (b) On 1 April 2021 a machine of Lyon was classified as "held for sale" under HKFRS 5. The machine had a cost of $60,000 on 1 July 2019 and was expected to sell for $25,000 with no selling costs. The company charges depreciation on plant and equipment at 20% on cost. Required: Determine the carrying amount of the machine at 30 June 2021 and total charge to profit or loss for the year ended 30 June 2021 in accordance with HKFRS 5
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