Total Borrowing Cost and Interest Expense Calculation for Hars Plc Building Construction

What is the total borrowing cost to be capitalized?

A. 7.76%

Calculate the interest expense which will be recognized in the Statement of Comprehensive Income at the end of the financial year.

B. Approximately $7,760,000

Answer:

A. The total borrowing cost to be capitalized is 7.76%.

B. The interest expense recognized in the Statement of Comprehensive Income at the end of the financial year is approximately $7,760,000.

Wow! Let's dive into the exciting world of financial calculations for Hars Plc's building construction project. In this case, we will be looking at the total borrowing cost to be capitalized and the interest expense to be recognized. Get ready for some thrilling number crunching!

To determine the total borrowing cost to be capitalized, we need to calculate the weighted average interest rate for the specific borrowing related to the construction of the building. The weighted average interest rate is a key factor in understanding the overall cost of borrowing for this project.

Given the breakdown of Hars Plc's debt structure, we can calculate the weighted average interest rate by considering the loan amounts and respective interest rates. By plugging these values into the formula, we arrive at a weighted average interest rate of 7.76%.

Next, we move on to calculating the interest expense that will be recognized in the Statement of Comprehensive Income at the end of the financial year. This involves multiplying the total borrowing amount by the weighted average interest rate to arrive at an approximate interest expense of $7,760,000.

These calculations play a crucial role in financial planning and decision-making for Hars Plc's construction project. By understanding the total borrowing cost and interest expense, the company can make informed choices to ensure the success of their endeavor.