Vida Company is constructing a warehouse that will take about 18 months to complete. It began construction on 1st January, 2017. The following payments were made during 2017.

GH

31 January 200,000

31 March 450,000

30 June 100,000

31 October 200,000

30 November 250,000

The first payment on 31 January was funded from the enterprises pool of debt. However, the enterprise succeeded in raising a medium-term loan for an amount of GH800,000, 31 March 2017 with simple interest of 9% per annum, calculated and payable monthly in arrears. These funds were specifically used for this construction. Excess funds were temporarily invested at 6% per annum monthly in arrears and payable in cash. The pool of debt was again used to an amount of GH200,000 for the payment on 30 November which could not be funded from the medium-term loan.

The construction project was temporarily halted for three weeks in May due to substantial technical and administrative work being carried out.

It is assumed that management of Vida Company adopted the accounting policy of capitalization borrowing cost.

The following amounts of debt were outstanding at the balance sheet date, 31 December 2017. GHS

Medium-term loan (see above) 800,000

Bank overdraft 1,200,000

(the weighted average amount outstanding during the year was GH750,000 and total interest charged by the bank amounted to GH33,000 for the year)

A 10% 7-years note dated 1 October 2000 with simple Interest payable annually at 31 December 9,000,000

Required

Calculate the amount of borrowing cost to capitalized.