Reference no: EM132832756
On December 31, 2019, Wellington Realty borrowed $1,000,000 at 7% payable annually to finance the construction of a new building. In 2020 the company had the following expenditures related to this project:
June 1, $400,000
July 1, $600,000
September 1, $1,200,000
December 1, $600,000
The project was finally done April 2021.
The companies other debt was as follows:
- 10-year 8% bond, dated December 31, 2013, interest payable annually for $10,000,000
- 15 year 10% note, dated December 31, 2007, interest payable annually for $2,500,000
- Interest revenue earned in 2020: $6,000
Instructions:
Problem A) Determine the amount of interest to be capitalized in 2020 related to the construction of the building
Problem B) Prepare the Journal entries to record the interest capitalization and the recognition of interest expense, if any, at December 31, 2020
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