SCENARIO SIX Funama Limited borrowed K800,000 on 1st January 2014 from Palama Bank. The loan attracts...
SCENARIO SIX
Funama Limited borrowed K800,000 on 1st January 2014 from Palama Bank. The loan attracts interest rate of 10% per annum. The loan was for the construction of its office block.
Construction commenced on 1st April 2014 and is likely to be completed on 31st March 2016.
On 30th September 2014, construction works were suspended because of striking construction workers. However, construction works resumed on 1st January 2015.
Note: Interest for the year to 31st December 2014 has been paid.
Required
Explain the accounting treatment of interest cost in the financial statements of Funama Limited for the year to 31st December 2014. (5 marks)
Homework Answers
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SCENARIO SIX
Funama Limited borrowed K800,000 on 1st January 2014 from Palama
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Requiredi Advise Caba Limited on how the above transaction shouid be treated in its financial statements for the year ended 31 March 2016 in accordance with international accounting standards (10 marks) Question 2 A piece of machine was purchased on 1 January 2014 at a cost of K1,200,000. It s depreciated at 25% its economic useful life. It is company policy to review machines for impairment annually. was reviewed for impairment on 31 December 2014 and the...
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