QUESTION 3 (10 marks)

This questionconsists of two independent parts,which are not related to one another:

SuperbusLtd is a company which specialises in the building of luxurious tour busses on order. At the beginning of the 20.22 financial year Superbus Ltd signed a contract to deliver two of these busses to Toerbus Ltd at N$ 2 000 000 per bus. Superbus Ltd estimates that it would take approximately 26 months to complete the contract.

On 1 July 20.22 Superbus Ltd obtained a long-term facilityof N$ 5 000 000 to financethis project. The facility bears market related interest at 12% per annum and is compounded quarterly in arrears.

The amountof borrowing costs to be capitalised for the year ended 31 March 20.23was calculated as N$ 52

046. The amount of work in progress for the bussesunder construction is calculated as N$ 1 312 046, for the year ended 31March 20.23

Construction of plant

On 1 November 20.22 Superbus commenced with the construction of a new plant (qualifying asset), which will take approximately 12 months to complete. Construction expenses were paid in cash on the following dates

N$

30 November 20.22

31 December 20.22

31 January 20.23

28 February 20.23

20 000

35 000

25 000

40 000

Cockroach Ltd has a cheque accountfacility with an overdraft limit of N$ 500 000, at a market relatedinterest rate of 18% per annum. On 1 January 20.23 a loan amounting to N$ 1 000 000 was raised to finance the remaining construction expenses.

The amount of borrowing costs to be capitalised for the year ended 28 February 20.23 amounted to N$ 16 672. Interest received on the surplus funds relating to the loan was N$ 13 167 and the total finance costs on the loanamounted to N$ 28 333 for the year ended 28 February 20.23

Required

(a) Indicate how the applicable items would be disclosed in the notesto the statement of profi or loss and other comprehensive income and in the inventory note for Superbus for the yea ending 31 March 20.23

b) Calculate the amountsat which the following itemswill be disclosed in the financial statements for the year ended 28 February 20.23

• Plant;
• Interest received;
• Finance cost

4

6

END