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Please give me the correct answer only with full details, else i will give dislike. On 1 April 20x1, Sun Itd purchased some land for
Please give me the correct answer only with full details, else i will give dislike.
On 1 April 20x1, Sun Itd purchased some land for Rs. 10 million (including legal costs of Rs. 1 million) in order to construct a new factory. Construction work commenced on 1 May 20X1. Sun Itd incurred the following costs in relation with its construction: Preparation and levelling of the land - Rs. 3,00,000. Purchase of materials for the construction - Rs. 6-08 million in total. Employment costs of the construction workers - Rs. 2,00,000 per month. Overhead costs incurred directly on the construction of the factory - Rs. 1,00,000 per month. Ongoing overhead costs allocated to the construction project using the company's normal overhead allocation model - Rs. 50,000 per month. Income received during the temporary use of the factory premises as a car park during the construction period - Rs. 50,000. Costs of relocating employees to work at the new factory - Rs. 300,000. Costs of the opening ceremony on 31 January 20x1 - Rs. 150,000. The factory was completed on 30 November 20X1 and production began on 1 February 20x2. The overall useful life of the factory building was estimated at 40 years from the date of completion. However, it is estimated that the roof will need to be replaced 20 years after the date of completion and that the cost of replacing the roof at current prices would be 30% of the total cost of the building. At the end of the 40-year period, Sun Itd has a legally enforceable obligation to demolish the factory and restore the site to its original condition. The directors estimate that the cost of demolition in 40 years' time (based on prices prevailing at that time) will be Rs. 20 million. An annual risk adjusted discount rate which is appropriate to this project is 8%. The present value of Rs. 1 payable in 40 years' time at an annual discount rate of 8% is 4.6 cents. The construction of the factory was partly financed by a loan of Rs. 17.5 million taken out on 1 April 20X1. The loan was at an annual rate of interest of 6%. During the period 1 April 20X1 to 31 August 20x1 (when the loan proceeds had been fully utilised to finance the construction), Sun Ltd received investment income of Rs. 100,000 on the temporary investment of the proceeds. Required: Compute the carrying amount of the factory in the Balance Sheet of Sun Ltd at 31 March 20x2. You should explain your treatment of all the amounts referred to in this part in yourStep by Step Solution
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