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QUESTION 9 Nanniama Ltd is constructing a warehouse that will take about 18 months to complete. It began construction on 1st January 2014. The following
QUESTION 9 Nanniama Ltd is constructing a warehouse that will take about 18 months to complete. It began construction on 1st January 2014. The following payments were made during 2014: TAS '000 31st January 200 31st March 450 30th June 100 31st October 200 30th November 250 The first payment on 31st January was funded from the entity's pool of debt. However, the entity succeeded in raising a medium-term loan for an amount of TAS 800,000 on 31st March, 2014, with simple interest of 9 percent per annum, calculated and payable monthly in arrears. These funds were specifically used for this construction. Excess funds were temporarily invested at 6 percent per annum monthly in arrears and payable in cash. The pool of debt was again used to an amount of TAS 200,000 for the payment on 30th November, which could not be funded from the medium-term loan. The construction project was temporarily halted for 3 weeks in May when substantial technical and administrative work was carried out. Nanniama Ltd adopted the accounting policy of capitalizing borrowing costs. The following amounts of debt were outstanding at the balance sheet date, 31st December 2014: 1,200 TAS '000 Medium-term loan (see description above) 800 Bank overdraft (The weighted average amount outstanding during the year was TAS 750,000 and total interest charged by the bank amounted to TAS 33,800 for the year) A 10%, 7-year note dated 31st October 2018 with simple interest payable annually at 31st December Required: 9,000 Calculate the borrowing costs to be capitalized
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