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Calculate the capitalisation rate

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Question - Olympus Bhd, a manufacturing company, borrowed RM400,000 on 1 January 2022 to finance the construction of a machine for its factory. On 31 December 2022, the funds remained unchanged with no repayment in the same year. RM300,000 was used for the construction of machine. Olympus wants to capitalise borrowing cost on qualifying assets. The details are:

31 Dec 2022 RM

12% Loan Stock 100,000

10% Term Loan 220,000

8% Redeemable preference shares 80,000

Required -

(a) Calculate the capitalisation rate.

(b) Calculate the amount of interest expense that qualifies for capitalisation for the year ended 31 Dec 2022.

(c) Calculate the amount of interest that is charged to profit or loss for year ended 31 Dec 2022.

Reference no: EM133143651

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