Exercise 10-8 On December 31, 2013, Main Inc. borrowed $7,320,000 at 12% payable
ID: 2472193 • Letter: E
Question
Exercise 10-8
On December 31, 2013, Main Inc. borrowed $7,320,000 at 12% payable annually to finance the construction of a new building. In 2014, the company made the following expenditures related to this building: March 1, $878,400; June 1, $1,464,000; July 1, $3,660,000; December 1, $3,660,000. The building was completed in February 2015. Additional information is provided as follows.
A) Determine the amount of interest to be capitalized in 2014 in relation to the construction of the building. (Round answer to 0 decimal places, e.g. 5,275.)
B)
prepare the journal entry to record the capitalization of interest and the recognition of interest expense, if any, at December 31, 2014. (If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.)
Date
Account Titles and Explanation
Debit
Credit
1. Other debt outstanding 10-year, 11% bond, December 31, 2007, interest payable annually $9,760,000 6-year, 10% note, dated December 31, 2011, interest payable annually $3,904,000 2. March 1, 2014, expenditure included land costs of $366,000 3. Interest revenue earned in 2014 $119,560Explanation / Answer
Answer:(A) Interest expense=$446520
Answer:(B) 31 dec 2014
Dr. Building 446520
Dr. Interest Expense 1895880
Cr. Cash 2342400
Expenditure 2014 Average Investment 1-Mar 878400 12-Oct 732000 1-Jun 1464000 12-Jul 854000 1-Jul 3660000 1830000 1-Dec 3660000 305000 3721000 Loans: Issued: Actual interest cost 12%to finance construction 7320000 12/31/2013 878400 11 % Bond 9760000 years ago 1073600 10% bond 3904000 years ago 390400 2342400 Average investment Avoidable interest cost 3721000 12% 446520 446520
Related Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.