Exercise 10-8 On December 31, 2016, Blue Inc. borrowed $3,840,000 at 13% payable
ID: 2518001 • Letter: E
Question
Exercise 10-8 On December 31, 2016, Blue Inc. borrowed $3,840,000 at 13% payable annually to finance the construction of a new building. In 2017, the company made the following expenditures related to this building: March 1, $460,800; June 1, $768,000; July 1, $1,920,000; December 1, $1,920,000. The building was completed in February 2018. Additional information is provided as follows. 920,0bleanecember:$1 1. Other debt outstanding 10-year, 14% bond, December 31, 2010, interest payable annually 6-year, 11% note, dated December 31, 2014, interest payable annually $5,120,000 $2,048,000 2. March 1, 2017, expenditure included land costs of $192,000 3. Interest revenue earned in 2017 $62,720 Determine the amount of interest to be capitalized in 2017 in relation to the construction of the building The amount of interest SHOW LIST OF ACCOUNTS LINK TO TEXT VIDEO: SIMILAR EXERCISE Prepare the journal entry to record the capitalization of interest and the recognition of interest expense, if any, at December 31, 2017. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter O for the amounts.) Date Account Titles and Explanation Debit Credit December 31, 2017 Click if you would like to Show Work for this question: Open Show WorkExplanation / Answer
LOANS:
AVERAGE INVESTMENT=1,952,000
RATE=13%
AVOIDABLE INTEREST COST=253,760
JOURNAL:
Dr.BUILDING ..................................$1,187,520
Dr.Interest Expense........................$253,760
Cr. Cash.............................................................$1,441,280
note:Interest on land expenditure during construction is capitalised on building cost ,not the land
EXPENDITURES,2016 AVERAGE FINANCE MARCH 1 460,800 10/12 384,000 JUNE 1 768,000 7/12 448,000 JULY 1 1,920,000 6/12 960,000 DECEMBER 1 1,920,000 1/12 160,000 TOTAL 1,952,000Related Questions
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