What is amount of borrowing costs that will be capitalized

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On March 1, 20x3, an entity placed an order for a machine from a German supplier. The total cost of the machine is $20,000,000 and is payable as follows:

  1. 25% on March 1, 20x3
  2. 50% on September 30, 20x3
  3. 25% on the delivery of the machine on December 31, 20x3.

The entity's long-term debt and related interest rates as follows:

Bank loan, 5%
$60,000,000
Bonds payable, 3.5%
150,000,000

Problem 1: Assuming that the machine is a qualifying asset as per IAS 23 - Borrowing Costs, What is the amount of borrowing costs that will be capitalized to the machine when it is received on December 31, 20x3?

Reference no: EM132816136

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