QUESTION 2 Bakhomo Limited (Bakhomo) raised a loan of N$500 000 on 1 January 2020 This loan was raised specifically to fund the construction of a building (a qualifying asset). Interest of N$50 000 is charged on this loan (10% per annum) and Is compounded annually on 31 December. Interest income of N$30 000 was earned evenly during the year. Included in this amount is N$9000 earned by investing surplus funds from the specific loan in a fixed deposit between 1 July - 30 September. Construction began on 1 March 2020 and ended 31 August 2020. Construction costs totalled N$410 000 during this period. The building was available for use on 1 September 2020 but was only brought Into use on 1 October 2020 due to unforeseen circumstances. Buildings are depreciated at 10% per annum, straight-line to a nil residual value. The company owns only one other item of property, plant and equipment, this being equipment with a carrying amount of N$370 000 at 31 December 2020 (N$420 000 at 31 December 2019). There have been no disposals, purchases or other movements in property, plant and equipment other than those that are evident from the information provided. The tax authorities: allow the deduction of interest as it is incurred unless it relates to the construction of an asset, in which case it is allowed in full as a deduction in the year in which the asset is brought into use; allow the deduction of a capital allowance based on the cost of the building at 5% per annum in the year that it is brought into use, not apportioned for part of a year; levy income tax at 30% of taxable profits. There are no other temporary differences other than those evident from the information above. Required: Marks Sub Total 2.1 Calculate the amount of borrowing costs that must be capitalised in terms of 2.5 2.5 IAS 23. Page 28 of 30