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AS16 borrowing cost
Accountancy
In an eg. Business has raised specific loan of 50L to construct an asset @10%p.a. interest. The construction of asset has started on 1/5/21 but the payment has been made in installments, i.e. 10L on 1/7/21 25L on 1/9/21 15L on 1/1/22 and const.ended on 31/3/22. So the ques is, interest on 50L will be capitalised (added in cost of asset) in which manner? Like whole 5L for entire 12 months or according to different periods like: 10%on 10L = 1L for 9months i.e.75K 10%on 25L= 2.5L for 7 months i.e.1,45,833 10%on15L =1.5L for 3 months i.e. 37,500 Total = 2,58,333??
Answers (4)
Solve questions with following steps :- 1.) Calculate Equivalent funds invested. 2.) Deduct Specific Borrowing from such Fund 3.) Residual General borrowing to be applied with interest rate on such borrowings or Weighted Average Rate of Interest . 4.) Apply specific rate on specific borrowings. Add both the interest and capitalize it.
Varun Mulay
Solve questions with following steps :- 1.) Calculate Equivalent funds invested. 2.) Deduct Specific Borrowing from such Fund 3.) Residual General borrowing to be applied with interest rate on such borrowings or Weighted Average Rate of Interest . 4.) Apply specific rate on specific borrowings. Add both the interest and capitalize it.
But what about the time, for how many months the interest will be capitalised? Whole 12m or some of the months as stated above ?