Huanghe Ltd. is constructing a building. Construction began on January 1 and was completed on December 31. Expenditures were HK$1,800,000 on March 1, HK$1,200,000 on June 1, and HK$3,000,000 on October 1. Huanghe Ltd. borrowed HK$1,000,000 on March 1 on a 5-year, 11% note to help finance construction of the building. In addition, the company had outstanding all year a 8%, 5-year, HK$2,000,000 note payable and an 10%, 4-year, HK$3,500,000 note payable. All interests are assumed to be payable annually on December 31.

(1)Compute avoidable interest for Huanghe.(Round to two decimal places when calculating the capitalizationrate)

(2)Prepare the Dec 31 journal entry.