Joe, Inc. constructs a building on land the company already owns. The construction started on April 1,
2010 and concluded on February 28, 2011. The following information on Joe, Inc.'s bank loans is
available:
Annual
Date Borrowed
Amount ($)
Interest Rate
Term
Construction Loan
12/31/2009
500,000
10%
5 yrs
Other Loan (1)
12/31/2008
600,000
9%
10 yrs
Other Loan (2)
12/31/2007
300,000
6%
10 yrs
Joe, Inc. makes annual interest payments to the bank on December 31 of each year. During 2010, Joe, Inc.
incurred the following costs in the construction of the building:
Exenditure Date
Expenditure Amount ($)
04/01/2010
600,000
06/01/2010
150,000
11/01/2010
300,000
What is the journal entry to record the interest payments made on December 31, 2010 and interest
capitalization?