1. Grand Palace constructs a special equipment for its own use. On 1 January 2016, the carrying amount of the equipment, including borrowing costs capitalized previously, is $70 million. Expenditures incurred for the construction of the equipment during 2016 are as follows:

1 April 2016 $20 million

1 July 2016 $30 million

Grand Palace borrows funds generally and uses them for the purpose of constructing the equipment. Its outstanding borrowings on 31 December 2016 and the related interest expenses for the year then ended are as follows:

Outstanding Borrowings Interest

(weighted average) Expenses

$ million $ million

Bank overdrafts (8 % per annum) 300.0 24.0

Short-term bank loan (3% per annum) 200.0 6.0

Long-term bank loan (4 % per annum) 500.0 20.0

1,000.0 50.0

Required:

Determine the carrying amount of the special equipment as at 31 December 2016 and prepare journal entries to account for the borrowing costs capitalised in 2016.