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Entity A is a local construction company, which provides construction services to different types of customers. To prepare for the company development, Entity A planned

Entity A is a local construction company, which provides construction services to different types of customers. To prepare for the company development, Entity A planned to set up a new factory in secure stable more future economic benefits.

Entity A has the following bank loans during year 2020:

  • $5,646,500 of 6.25% long-term bank loan
  • $4,565,000 of 8.25% short-term bank loan

The construction of the new factory started from 1 March 2020 to 30 November 2020.

Entity A spent expenditures of $3,456,500 on 1 March 2020 for the construction of the new factory.

The end of the reporting period is 31 December.

REQUIRED:

Measure the borrowing costs should be capitalised.

ANSWER:

The capitalisation rate is _____________%.

The borrowing costs should be capitalised is $_______________.

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