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Queson 1 (13 marks) Edson Limited (EDL) entered into a $30 million contract with another entity for the construction of a new head ofce (a
Queson 1 (13 marks) Edson Limited (\"EDL\") entered into a $30 million contract with another entity for the construction of a new head ofce (a qualifying asset). EDL paid 40% of the cost at the time when the construction began on 1 April 2021. The remaining cost will be paid next year. EDL's borrowings at the current year end of 31 December 2021 were as follows: Amount of borrowing Interest rate (with simple Details of the borrowing interest payable annually on 1 January) $6 million 8% Borrowed on 1 January 2021 specically for funding the new head ofce construction Temporary investment of funds until required resulted in interest income of $50,000 (already received) $30 million 12% General borrowing with loan balance remained unchanged in the current year $20 million 10% General borrowing with loan balance remained unchanged in the current year Required: In accordance with HKAS 23 Borrowing Costs, calculate the total borrowing costs of EDL to be capitalized for the current year ended 31 December 2021. Prepare the necessary journal entry for EDL with regard to its borrowing costs for the current year. [13 marks]
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