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How much of the financing cost should be capitalized

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Question - A Company is constructing a building for their expansion plan. However, they need financing to complete the said building. To remedy this, they obtained financing from B, C, and D companies. The following is the list of their payables.

a) B Company - 10 Million at 8% specific to the construction of the building

b) C Company - 15 Million at 7% general borrowing

c) D Company - 12 Million at 9% general borrowing

The loan obtained from B company was invested as it was not consumed immediately. The investment earned a return of 400,000.

Additional information: Construction cost is 12 Million incurred evenly within the year.

How much of the financing cost should be capitalized?

Reference no: EM132937153

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