a. Compute the amount of interest to be capitalized during the year.
Amount of interest to be capitalized during the year: $215,050
b. Calculate the amount of interest expense for the year: $29,750
c. Prepare the summary journal entry for the year to record the construction expenditures and interest, assuming that construction is not complete on December 31. Assume all payments are in cash.
Construction note, 12% Shom noe paybie.15 Accounts payable ($340,000) [1,360,000] [1,360,000]
Specific Debt Construction loan $340,000 [General Debt Note payable $1,360,000]
12% 15%
$40,800 $174,250 $215,059
January 1 July 1
$102,000 $986,000 $2,720,000 $7,174,000
12 6 6
$20,000 $693,000 $99,906
December 31 weighted avg.
$501,667
Debt
Available
Specific Debt General Debt
$340,000 $1,141,647 $1,501,667
12% 15%
$40,800 $174,250 $215,059
Amount of interest to be capitalized during the year: $215,050
b. Calculate the amount of interest expense for the year: $29,750
c. Prepare the summary journal entry for the year to record the construction
on December 31. Assume all payments are in cash.
Dec. 31 Building Expense $11,156,250
Interest Expense $29,750
Cash $7,174,000