a) The following problem and issues have arisen during the preparation of the draft financial statements of Dawes, a listed company, for the year to 30 September 20X6:

Dawes capitalises borrowing costs in respect of qualifying assets, in accordance with IAS 23 Borrowing Costs. Details relating to two such assets and their financing are:

Manufacturing plant

On October 1 20X5 Dawes commenced construction of a manufacturing plant that is expected to take four years to complete. It is being financed entirely by a four-year term loan of $5m (taken out at the start of the construction). The loan carries fixed interest at 14% per year and issue costs of 2% (of the loan value) were incurred on the loan. During the year $72,000 had been earned from the temporary investment of these borrowings.

Note: Use the straight-line method to amortise issue costs.

Investment property

Due to the poor state of the property letting market, construction of this property was halted for the first three months of the year. On 30 June 20X6, after a prolonged construction period, the company completed the property. Despite attempts to let the property it remained empty at the year end. The average carrying amount of property before inclusion of the current years borrowing cost is $12m. The investment property has been financed out of funds borrowed generally for the purpose of financing qualifying assets. The companys weighted average cost of capital is 11% including all borrowings, and 10% if the $5m referred to above is excluded.

Required

Calculate with explanations, the amount of borrowing costs that should be capitalised in respect of each qualifying as