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Refer to the picture (Tracer Group Case) Review all of the cost involved in the construction of the head office building: 1. Outline recommended accounting
Refer to the picture (Tracer Group Case) Review all of the cost involved in the construction of the head office building: 1. Outline recommended accounting treatment. 2. Provide relevant journal entries. 3. Draft Tracer Limiteds accounting policy note relating to its treatment of borrowing costs.
On 1 January 205 Tracer Limited commenced the construction of a new head office. The new building was scheduled for completion on 30 June 205 but, due to a work stoppage from 1 April-30 June, the building was eventually completed on 30 September 205. The various costs associated with the construction, paid by Tracer Limited, are summarised as follows: From 1 January 205 Tracer Limited paid the amounts outlined, based on architects' certificates obtained at each due date. To finance the construction, Tracer Limited used bank funds obtained for general company use. The interest rate charged on these funds was bank base rate plus 3%. On 1 January 205, the bank base rate was 5%, and this increased to 6% on 1 July 205. The total costs of 4.17 million were capitalised as buildings by Tracer Limited at 30 September 205. The asset was valued on 31 December 205 at 6 million, and was included in the financial statements at that valuation. Tracer Limited depreciates buildings at 2% per annum on a straight-line basisStep by Step Solution
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