Rise PJSC acquired a tract of land on 12 June 2018 by paying Dh10 million and assuming an existing mortgage of Dh2 million on the land.

Rise demolished an empty structure on the property at a cost of Dh500,000. The company was able to sell bricks and other material from the demolished building for Dh20,000.

Regrading and clearing the land costed Dh40,000. Rise began constructing a new factory on the site. Architectural fees were Dh800,000 and the payment to contractors for the construction of the factory totaled Dh12 million.

Rise negotiated a bank loan to help ease the cash flow problem during the construction. Interest payments over the period of construction totaled Dh700,000. Legal fees incurred in the transactions totaled Dh68,000, of which Dh18,000 was related to the land purchase. The remaining Dh50,000 of the legal fees were incurred because of contracts with the architects and the construction company.

The construction was completed and used as a factory on 1 July 2019. The estimated useful life of the building was 50 years.

The company wants to capitalize the borrowing cost where possible. The companys year-end is 31 December.

Required:

(a) Calculate the costs of the land and building, respectively. (4 marks)

(b) Compute the depreciation charge for year 2019. (2 marks)

(c) Prepare an extract of balance sheet as at 31 December 2019. (2 marks)