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3,00,000 10 Interest upto 31.3.2012 (40,00.000 x 9% x 12 months) Less: Interest relating to pre-operative period 3,00,000 * 7o Amount to be charged to

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3,00,000 10 Interest upto 31.3.2012 (40,00.000 x 9% x 12 months) Less: Interest relating to pre-operative period 3,00,000 * 7o Amount to be charged to P&L A/C Pre-operative interest to be capitalized = = 12.10.000) 90,000 2 10.000 09 Journal Entries 3 2.10,000 Dr. 2,10,000 Dr. 90,000 Machinery Alc To Loan Alc (Being interest on loan for pre-operative period capitalized) Interest on loan Alc To Loan Alc (Being the interest on loan for the post-operative period) Profit and Loss A/C To interest on loan Alc (Being interest on loan transferred to P&L Alc) 90,000 Dr 90.000 90,000 Illustration 20 X Ltd. began construction of a new building on 14 January, 2012. It obtained 1 lakh special loan to finance the construction of the building on 1 January, 2012 at an interest rate of 10%. The company's other outstanding two non-specific loans were: Amount Rate of interest 75,00,000 11% 9,00,000 13% The expenditures that were made on the building project were as follows: January April July December 2012 2012 2012 2012 2,00,000 2,50,000 4,50.000 1,20,000 Building was completed by 31" December, 2012. Following the principles prescribed in AS 16 Borrowing Cost calculate the amount of interest to be capitalized and pass one Journal Entry for capitalizing the cost and borrowing cost in respect of the building

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