A loan of N$100 000 was raised specifically for the construction of a plant, which met the definition of a qualifying asset. The loan was used to acquire the necessary raw materials and pay the related labour costs necessary for the construction of this asset. A further loan of N$20 000 had to then be raised to buy an extra 3 tons of material X, because the original load of material X (also having cost N$20 000) was completely destroyed in a freak storm.
(Choose one correct option only)

Question

A loan of N$100 000 was raised specifically for the construction of a plant, which met the definition of a qualifying asset. The loan was used to acquire the necessary raw materials and pay the related labour costs necessary for the construction of this asset. A further loan of N$20 000 had to then be raised to buy an extra 3 tons of material X, because the original load of material X (also having cost N$20 000) was completely destroyed in a freak storm. 
 (Choose one correct option only)

Accepted Answer

The borrowing costs on the loan of N$100 000 will be capitalised whereas the borrowing costs on the loan of N$20 000 will be expensed.

Answer

The borrowing costs on both loans would be expensed

Answer

None of the options are correct.

Answer

The borrowing costs on the loan of N$100 000 will be expensed whereas the borrowing costs on the loan of N$20 000 will be capitalised.

Answer

The borrowing costs on both loans would be capitalised.

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A loan of N$100 000 was raised specifically for the construction of a plant, whi...

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