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KLM had the following loans in place at the beginning and end of 2011: ...

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Accounting

KLM had the following loans in place at the beginning and end of 2011:

Description 1 January 2011
Bank loan 6% p.a. 200, 000
Bank loan 8% p.a. 130, 000
Debenture stock 5.5% p.a. 50, 000

The bank loans were taken for no specific purpose and KLM used them to finance general spending and the construction of a new machinery.

KLM used GHc 220 000 for the construction of the machinery in 2011.

Required:

What borrowing cost should be capitalized for the new machinery in 2011?

Determine the cost of the machinery that will be shown in the statement of financial position

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