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2. Discuss the accounting treatment for the borrowing cost in respect of the qualifying assets in accordance with MFRS123 Borrowing Costs? (Calculation is needed). (8 marks) Inap Desa village style The project started in year 2011, where Innforest Bhd made an investment to build forty (40) village houses with a different theme of 'bangsa melayu' costing RM50,000 each and 1 cook house amounting RM100,000. The borrowings applied of RM2,500,000 four-year term loan from Public Islamic Bank on 1 February 2011 to finance the construction of the houses. On 1 May 2011, the bank approved only RM2,000,000 loan which carried an interest rate of 5% per annum. The construction of the houses commenced in July 2011 and it took three years to complete. Once completed, the houses are operated as homestay (36 units), pickles and fruit jam lab (1 unit), Malay craft demonstration house (1 unit), massage parlour house (1 unit) and cook house (1 unit). One of the village houses was rented out to Pak Abu for his show to demonstrate on making Malay craft by using Malay carpentry tools such as beliung, pahat and kikir. The craft items made by Pak Abu is available for sale to the visitors. Pak Abu paid RM500 for the monthly rental. Accounting Policy Innforest Bhd adopts revaluation/fair value model to record its non-current assets. The grant is treated as related to asset method. The depreciation is using straight line method. The useful life of assets are as follows: Houses 20 years with major maintenance every 5 years. Machine: 10 years with major overhaul every 5 years. The financial year end is on 31 December every year

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