Question

On December 31, 2013, Main Inc. borrowed $5,040,000 at 13% payable annually to finance the construction of a new building. In 2014, the company made the following expenditures related to this building: March 1, $604,800; June 1, $1,008,000; July 1, $2,520,000; December 1, $2,520,000. The building was completed in February 2015. Additional information is provided as follows. 1. Other debt outstanding 10-year, 12% bond, December 31, 2007, interest payable annually $6,720,000 6-year, 11% note, dated December 31, 2011, interest payable annually $2,688,000 2. March 1, 2014, expenditure included land costs of $252,000 3. Interest revenue earned in 2014 $82,320

On December 31, 2013, Main Inc. borrowed $5,040,000 at 13% payable annually to finance the construction of a new building. In 2014, the company made the following expenditures related to this building: March 1, $604,800; June 1, $1,008,000; July 1, $2,520,000; December 1, $2,520,000. The building was completed in February 2015. Additional information is provided as follows.1. Other debt outstanding 10-year, 12% bond, December 31, 2007, interest payable annually $6,720,0006-year, 11% note, dated December 31, 2011, interest payable annually $2,688,000 2. March 1, 2014, expenditure included land costs of $252,0003. Interest revenue earned in 2014 $82,320SHOW LIST OF ACCOUNTS LINK TOYour answer is partially correct. Try again. Prepare the journal entry to record the capitalization of interest and the recognition of interest expense, if any, at December 31, 2014. (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 0 for the amounts.)Date Account Titles and Explanation Debit Credit December 31, 2014 SHOW LIST OF ACCOUNTS LINK TO TEXT Your answer is incorrect. Try again.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.)The amount of interest $

On December 31, 2013, Main Inc. borrowed $5,040,000 at 13% payable annually to finance the construction of a new building. In 2014, the company made the following expenditures related to this building: March 1, $604,800; June 1, $1,008,000; July 1, $2,520,000; December 1, $2,520,000. The building was completed in February 2015. Additional information is provided as follows.1. Other debt outstanding 10-year, 12% bond, December 31, 2007, interest payable annually $6,720,0006-year, 11% note, dated December 31, 2011, interest payable annually $2,688,000 2. March 1, 2014, expenditure included land costs of $252,0003. Interest revenue earned in 2014 $82,320SHOW LIST OF ACCOUNTS LINK TOYour answer is partially correct. Try again. Prepare the journal entry to record the capitalization of interest and the recognition of interest expense, if any, at December 31, 2014. (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 0 for the amounts.)Date Account Titles and Explanation Debit Credit December 31, 2014 SHOW LIST OF ACCOUNTS LINK TO TEXT Your answer is incorrect. Try again.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.)The amount of interest $

Your answer is incorrect. Try again. 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.) The amount of interest $ SHOW LIST OF ACCOUNTS LINK TO TEXT

On December 31, 2013, Main Inc. borrowed $5,040,000 at 13% payable annually to finance the construction of a new building. In 2014, the company made the following expenditures related to this building: March 1, $604,800; June 1, $1,008,000; July 1, $2,520,000; December 1, $2,520,000. The building was completed in February 2015. Additional information is provided as follows.1. Other debt outstanding 10-year, 12% bond, December 31, 2007, interest payable annually $6,720,0006-year, 11% note, dated December 31, 2011, interest payable annually $2,688,000 2. March 1, 2014, expenditure included land costs of $252,0003. Interest revenue earned in 2014 $82,320SHOW LIST OF ACCOUNTS LINK TOYour answer is partially correct. Try again. Prepare the journal entry to record the capitalization of interest and the recognition of interest expense, if any, at December 31, 2014. (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 0 for the amounts.)Date Account Titles and Explanation Debit Credit December 31, 2014 SHOW LIST OF ACCOUNTS LINK TO TEXT Your answer is incorrect. Try again.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.)The amount of interest $

On December 31, 2013, Main Inc. borrowed $5,040,000 at 13% payable annually to finance the construction of a new building. In 2014, the company made the following expenditures related to this building: March 1, $604,800; June 1, $1,008,000; July 1, $2,520,000; December 1, $2,520,000. The building was completed in February 2015. Additional information is provided as follows.1. Other debt outstanding 10-year, 12% bond, December 31, 2007, interest payable annually $6,720,0006-year, 11% note, dated December 31, 2011, interest payable annually $2,688,000 2. March 1, 2014, expenditure included land costs of $252,0003. Interest revenue earned in 2014 $82,320SHOW LIST OF ACCOUNTS LINK TOYour answer is partially correct. Try again. Prepare the journal entry to record the capitalization of interest and the recognition of interest expense, if any, at December 31, 2014. (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 0 for the amounts.)Date Account Titles and Explanation Debit Credit December 31, 2014 SHOW LIST OF ACCOUNTS LINK TO TEXT Your answer is incorrect. Try again.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.)The amount of interest $

Your answer is partially correct. Try again. Prepare the journal entry to record the capitalization of interest and the recognition of interest expense, if any, at December 31, 2014. (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 0 for the amounts.) Date Account Titles and Explanation Debit Credit December 31, 2014 SHOW LIST OF ACCOUNTS LINK TO

Answer 1

The amount borrowed for construction of building is higher than the weighted average accumulated expenditure. Therefore, the actual rate of borrowing would be considered he, 13%. The amount of interest to be capitalized in 2014 in relation to the construction of the building is calculated below: 13 Amount to be capitalized $2,562,000 x S333,060 Therefore, the amount of interest to be capitalized in 2014 in relation to the construction of the building is $333,060

Journal entry to record the capitalization of interest and the recognition of interest expense at December 31, 2014. Dec.3 Building a/c 2014 DR. $333,060 Interest expense a/c DR. $1,424,220 To Cash a/c $1,757,280 (To record capitalization of interest and the recognition of interest expense) 13 12 Interest paid S5,040,000 x 100+$6,720,000 *100 +$2.,688, 000 x 100 - S6,55,200S806, 400S295, 680 - S1,757,280