BAURU, S.A., a Brazilian corporation, borrows capital from a local bank to finance the construction of its manufacturing plant. The loan has the following conditions:
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which of the following is the amount of interest related to the plant construction i 609754
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1 January 2009 |
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Amount borrowed |
500 million Brazilian real (BRL) |
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Annual interest rate |
14 percent |
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Term of the loan |
3 years |
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Payment method |
Annual payment of interest only. Principal amortization is due at the end of the loan term. |
The construction of the plant takes two years, during which time BAURU earned BRL 10 million by temporarily investing the loan proceeds. Which of the following is the amount of interest related to the plant construction (in BRL million) that can be capitalized in BAURU’s balance sheet?
A. 130
B. 140
C. 210
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