To the extent that an entity borrows funds generally and uses them for the purpose of obtaining a qualifying asset, the entity shall determine the amount of borrowing costs eligible for capitalisation by applying a capitalisation rate to the expenditures on that asset. The capitalisation rate shall be the weighted average of the borrowing costs applicable to the borrowings of the entity that are outstanding during the period.
What if a company has interest free loans from shareholders in addition to interest-bearing loans from financial institutions? Do you take into account the effective interest income due to the interest-free loan (effectively lowering the WACC)? This is quite common as banks often only finances a construction project partially, and the rest of the funds are added by shareholders.
Your feedback would be must appreciated!
Is cost of goods sold a period cost?
No it is a product cost as it varies with the number of product sold.
Hope the answer of the question.