Reference no: EM133041266

Question - On 1 July 2014, Claire Beauty Bhd acquired two acres of land in Kuantan, Pahang at a cost of RM40 million to cater the rising demand in East Coast Malaysia. The acquisition of the land was wholly financed by a five-year term loan of RM40 million which carries an effective interest rate of 5% per annum. On the same date, Claire Beauty Bhd secured the following borrowings to part-finance the construction of large manufacturing plant on the land amounted to RM100 million and another RM50 million for general operations of the company: Amount borrowed (RM'000) 10% term loan from bank 70,000 8% loan stock 80,000 The construction of the manufacturing plant took three years' time to complete until 30 June 2017. However, in the middle of the year 2016, the construction was interrupted due to abandonment by contractors from 1 April until 30 September 2016. Claire Beauty Bhd took the opportunity of the suspension period to invest RM2 million of the loan obtained for the construction in a fixed deposit earning 3% per annum. Despite of the interruption, the construction was finally completed as scheduled on 30 June 2017. Calculate the amount of borrowing cost that can be capitalized by Claire Beauty Bhd for the financial year ended 30 June 2015.