10 marks (20 minutes) ABC Inc. purchased undeveloped land for $3,000,0000 and incurred site preparation costs to ready the land to construct a new factory for its own use of $800,000. On February 1, 2020 ABC started construction on the new factory. The factory was completed November 30, 2020. The following direct costs in the factory construction were paid on the following dates: Date 1-2-20 $ 1-4-20 $ 1-5-20 $ 1-6-20 $ Amount 4,000,000 4,500,000 200,000 1,300,000 The compnay's borrowings are as follows: 1) On February 1, 2020 ABC arranged a 7% construction loan of $8,000,000 to help finance the construction. The loan was repaid on November 30, 2020. 2) A bank loan payable in the amount of $15,000,000 bearing interest at 6% was outstanding for the entire year. 3) ABC invested the contruction loan proceeds not in use and earned $10,000 in investment income over the construction period. In preparation for the operation of the new factory, ABC incurred the following costs: Item Machinery purchase (subject to a 2% discount that was not taken) Freight on machinery purchased Paving of parking lot Repairs to factory wall which was damaged upon installation of the machinery Cost $ 350,000 $ 10,000 $ 150,000 $ 2,000 Required: a) Calculate the interest cost to be capitalized to the new factory asset. (6 marks) b) Determine the cost of land, and machinery based on the above information. (4 marks)