Section B - Case 2: EcoWind (Question 1 of 5)
Scenario: EcoWind, a renewable energy firm, began constructing a new wind farm on 1 March 20X5. Construction costs (excluding interest) totaled $3,000,000. To fund this, EcoWind took out a $2,000,000 specific loan at 6% per annum on 1 February 20X5. Construction was completed on 30 November 20X5.
EcoWind received a $500,000 government grant on 1 December 20X5 to help fund the wind farm, which has a 20-year useful life. EcoWind uses the deferred income method for grants.
On 31 December 20X5, EcoWind tested an older solar plant for impairment. Its carrying amount was $1,500,000. Its Fair Value Less Costs of Disposal was $1,200,000 and its Value in Use was $1,300,000.
Question: Under IAS 23, how much borrowing cost should be capitalized into the cost of the wind farm in 20X5?
ACCA · Question 25 · Property, Plant and Equipment
Section B - Case 2: EcoWind (Question 5 of 5)
Scenario: EcoWind, a renewable energy firm, began constructing a new wind farm on 1 March 20X5. Construction costs (excluding interest) totaled $3,000,000. To fund this, EcoWind took out a $2,000,000 specific loan at 6% per annum on 1 February 20X5. Construction was completed on 30 November 20X5.
EcoWind received a $500,000 government grant on 1 December 20X5 to help fund the wind farm, which has a 20-year useful life. EcoWind uses the deferred income method for grants.
On 31 December 20X5, EcoWind tested an older solar plant for impairment. Its carrying amount was $1,500,000. Its Fair Value Less Costs of Disposal was $1,200,000 and its Value in Use was $1,300,000.
Question: If EcoWind had instead chosen to deduct the grant from the carrying amount of the asset, what would be the depreciation charge for the wind farm for the year ended 31 December 20X5?
Answer options:
$12,875
$10,792
$129,500
$10,417
32 questions · hints · full answers · grading
Expert