Calculate the borrowing costs to be capitalised

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Question - ED had the following loans in place at the beginning and the end of 20X8.

 

1 January 20X8

31 December 20X8

 

$M

$M

10% Bank loan repayable 20Y3

120

120

9.5% Bank loan repayable 20Y1

80

80

8.9% Bank loan repayable 20Y8

0

150

The 8.9% debenture was issued to fund the construction of a qualifying asset (a piece of mining equipment). The construction began on 1 July 20X8.

On 1 January 20X8, ED began construction of a qualifying asset, a piece of machinery for a hydroelectric plant, using existing borrowings. Expenditure drawn down for the construction was:

$30m on 1 January 20X8,

$20m on 1 October 20X8.

Required - Calculate the borrowing costs to be capitalised for the hydroelectric plant machine.

Reference no: EM133160203

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