Sec. 2 I and 3 marthen Question 2 Spitfire Industries has decided to construct a new computerized assembly plant. It is estimated that the construction period will be about 15 months and that the cost of construction will be approximately RM1.7 million (excluding capitalized interest). The land and buildings account reported the following items for 2018 - 2019: 31 Jan. 2018 Land and old building purchased RM1,500,000 28 Feb. 2018 Costs of removal of old building 100,000 1 Apr. 2018 Proceeds from scrap sale (13,000) 1 Apr 2018 15 payment to contractors for new construction 520,000 1 Jun. 2018 Legal fees paid for land title 6,000 T Jun. 2018 2nd payment to contractors 800,000 1 Jul. 2018 Insurance premium on building X 31 Jul. 2018 Special tax assessment on land 3,000 2,500 8,000 250,000 130,000 15 Sep. 2018 General expensesx 31 Oct. 2018 3rd payment to contractors 31 Jan. 2019 Final payment to contractors The construction completed on 30 June 2019. A 12% construction loan of RM1 million is obtained on 1 January 2018. An addition to the construction loan, Spitfire has the following outstanding debt during the construction period: i. 5-year note payable RM1 million, 11% interest Mortgage on other plant RM2.8 million, 9% interest Required: a) Determine the amount to be recorded on the book of Spitfire Industries as at 31 December 2018 and 2019 for land and the new building constructed. b) Show all the relevant journal entries to record the effect in (a). c) Briefly explain the requirement of MFRS123 regarding borrowing costs that can be capitalized as assets. [20 marks] End of question paper Sec. 2 I and 3 marthen Question 2 Spitfire Industries has decided to construct a new computerized assembly plant. It is estimated that the construction period will be about 15 months and that the cost of construction will be approximately RM1.7 million (excluding capitalized interest). The land and buildings account reported the following items for 2018 - 2019: 31 Jan. 2018 Land and old building purchased RM1,500,000 28 Feb. 2018 Costs of removal of old building 100,000 1 Apr. 2018 Proceeds from scrap sale (13,000) 1 Apr 2018 15 payment to contractors for new construction 520,000 1 Jun. 2018 Legal fees paid for land title 6,000 T Jun. 2018 2nd payment to contractors 800,000 1 Jul. 2018 Insurance premium on building X 31 Jul. 2018 Special tax assessment on land 3,000 2,500 8,000 250,000 130,000 15 Sep. 2018 General expensesx 31 Oct. 2018 3rd payment to contractors 31 Jan. 2019 Final payment to contractors The construction completed on 30 June 2019. A 12% construction loan of RM1 million is obtained on 1 January 2018. An addition to the construction loan, Spitfire has the following outstanding debt during the construction period: i. 5-year note payable RM1 million, 11% interest Mortgage on other plant RM2.8 million, 9% interest Required: a) Determine the amount to be recorded on the book of Spitfire Industries as at 31 December 2018 and 2019 for land and the new building constructed. b) Show all the relevant journal entries to record the effect in (a). c) Briefly explain the requirement of MFRS123 regarding borrowing costs that can be capitalized as assets. [20 marks] End of question paper