The company constructed a building in 20X0 for a total cost of €70,000. For the construction of the building it took a bank loan of €30,000 which will be repaid in three instalments. The construction of the building was completed on 30/6/20X1. The interest for 20X0 and 20X1 was €3,000 & €2,000 respectively spread pro rata throughout the year. In addition, in FY20X0 until the loan was made available for the construction of the building it remained in an interest bearing bank account generating interest income of €50. The accounting treatment of the interest for the years 20X0 and 20X1 is requested.
The company constructed a building in 20X0 for a total cost of €70,000. For the construction of the building it took a bank loan of €30,000 which will be repaid in three instalments. The construction of the building was completed on 30/6/20X1. The interest for 20X0 and 20X1 was €3,000 & €2,000 respectively spread pro rata throughout the year. In addition, in FY20X0 until the loan was made available for the construction of the building it remained in an interest bearing bank account generating interest income of €50. The accounting treatment of the interest for the years 20X0 and 20X1 is requested.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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The company constructed a building in 20X0 for a total cost of €70,000. For the construction of the building it took a bank loan of €30,000 which will be repaid in three instalments. The construction of the building was completed on 30/6/20X1. The interest for 20X0 and 20X1 was €3,000 & €2,000 respectively spread pro rata throughout the year. In addition, in FY20X0 until the loan was made available for the construction of the building it remained in an interest bearing bank account generating interest income of €50. The accounting treatment of the interest for the years 20X0 and 20X1 is requested.
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