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Question 10
Accountancy
How is the amount of Rs 34000 arrived at, without interest rate given in the problem? Video Details ------------- P1 - Accounting Standards - CA Inter AS 16 #18. MCQ Test 1 - AS 16
Answers (2)
Can you please help me out with this? The question is as below 10. (Hard) The following are details of loans obtained by a company on 1st April 2017 and were outstanding throughout the year. Amount of Loan Interest Paid for 2017-18 Rs. 5,00,000 Rs. 50,000 Rs. 3,00,000 Rs. 25,000 Rs. 2,00,000 Rs. 18,000 The company utilised the loans borrowed for multiple purpose including construction of qualifying asset. The loan of Rs. 5,00,000 was specifically borrowed for purchase of a truck. The amount spent on construction of a plant (qualifying asset) on 1st April 2017 is Rs. 4,00,000. What is the amount of borrowing cost to be capitalised to Plant, assuming the construction of asset was completed on 31st March 2017
When the funds have been borrowed generally then the amount of borrowing costs to be capitalized is to be calculated by applying a capitalization rate to the expenditure on that asset. The capitalization rate, here, means the weighted average of the borrowing costs applicable to the borrowings of the enterprise that are outstanding during the period, other than borrowings made specifically for obtaining a qualifying asset. However, the amount of borrowing costs capitalized during a period should not exceed the amount of borrowing costs incurred during that period. In case of borrowings which are not specific to the qualifying asset (also known as general borrowings). In the given case, the borrowing for truck is specific and will be excluded to arrive at the capitalisation rate. Capitalisation Rate = Total Interest / Total Borrowings x 100 = 43,000/5,00,000 = 8.6% Amount to be capitalised = 4,00,000 x 8.6% = 34,400
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