Question
XYZ company secured a 20% loan facility of GHS 800,000 for the construction of a two-story building on Apr 1 2012. Construction on the said
XYZ company secured a 20% loan facility of GHS 800,000 for the construction of a two-story building on Apr 1 2012. Construction on the said project commenced on Jan 1 2014. The following is the expenditure patterns on the asset:
GHS
Jan 1 2012 (Land acquired for the building construction) 155,000
Mar 1 2012 180,000
Apr 1 2012 260,000
Aug 31 2012 300,000
Feb 1 2013 400,000
Before the drawdown of the loan facility, the financing of the asset was done from an existing pool of funds as follows:
GHS
18% Long term loan 600,000
25% Medium-term Loan 350,000
All expenditures paid for after the drawdown of the project-specific loan was funded by that loan except to the extent that it exceeded the available fund on the facility. Excess fund on the facility loan was temporarily invested at an interest rate of 9%, and interest was payable monthly in arrears. The building was substantially completed on May 31, 2015, and became available for use on Jul 1, 2015. XYZ has the policy of depreciating buildings at 5% p.a on a straight-line basis.
Required:
Show how the above will be treated in the books of XYZ for the year ended Dec 31, 2014, and 2015. This should include extracts of SoCI and Financial Position.
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