Gyan Ltd. borrowed 10 crore for construction of a plant at the rate of 10% per annum (interest paid annually 1 crore). The construction was being…

CA Intermediate · Advanced Accounting · RTP · May 2024
Gyan Ltd. borrowed 10 crore for construction of a plant at the rate of 10% per annum (interest paid annually 1 crore). The construction was being carried on and out of the borrowings, 4 crore was temporarily placed in a fixed deposit at the rate of 6% per annum (interest earned 24 lakh). At the year end, how much cost of borrowing Gyan Limited will capitalise?
(A) Interest paid on 10 crore i.e.1 crore
(B) Interest paid on 6 crore as only this amount was utilized i.e.60 Lakh.
(C) Interest paid less income on temporary investment i.e.76 lakh
(D) Nothing will be capitalized

Suggested Answer and Working Notes:

Correct Answer: Option (C)

Interest paid less income on temporary investment i.e.76 lakh

Topics: AS 16

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