Computing and Recording Interest CapitalizationThe following information is from Bowin Inc. for a long-term construction project that is expected to be completed in January of next year. The constructionproject is for a building intended for the company's own use. The capital expenditure on January 1 of the current year is for the purchase of land for the buildingsite. No new construction loans were opened for the project during the year. All debt was outstanding for the full year.Capital Expenditures for Current YearDateActual ExpendituresJan. 1Mar. 31June 30Nov. 30Outstanding Debt in Current YearDebtNote payableNote payableBond payableNote payable$102,0003,060,0006,120,0003,060,000Debt Amount Interest Rate$3,400,0008%2,720,0008%10%9%6,800,0001,700,000CheckCompute Interest to Capitalize and Expense Journal Entry in Year 1Journal Entries in Year 2b. Prepare the summary entry to record the construction expenditures and interest for the year. Assume all payments are in cash.Account NameDr.Cr.LandConstruction in ProcessInterest ExpenseCashTo record construction expenditures and interest.102,00012,240,000805,6640000G Mar. 31June 30Nov. 30Outstanding Debt in Current Year3,060,0006,120,0003,060,000DebtDebt Amount Interest RateNote payable$3,400,0008%Note payable2,720,0008%Bond payable6,800,00010%Note payable 1,700,0009%Compute Interest to Capitalize and ExpenseJournal Entry in Year 1c. Assume that the project is completed on January 1 of the next year.(1) Prepare the entry to transfer costs from construction in process to property and equipment.(2) Prepare the annual entry for depreciation for that next year, assuming that the building has a useful life of 30 years with no salvage value, and that thecompany uses the straight-line depreciation method.To record cost transferAccount NameCheckAccount NameTo record annual depreciationDr.Journal Entries in Year 2Dr.000Cr.Cr.

Interest capitalization refers to the unpaid interest that is to be added to the amount of the loan.…

Computing and Recording Interest Capitalization The following information is from Bowin Inc. for a long-term construction project that is expected to be completed in January of next year. The construction project is for a building intended for the company's own use. The capital expenditure on January 1 of the current year is for the purchase of land for the building site. No new construction loans were opened for the project during the year. All debt was outstanding for the full year. Capital Expenditures for Current Year Actual Expenditures Date Jan. 1 Mar. 31 June 30 Nov. 30 $102,000 3,060,000 6,120,000 3,060,000 Outstanding Debt in Current Year Debt Note payable Note payable Bond payable Note payable Debt Amount Interest Rate $3,400,000 8% 2,720,000 8% 6,800,000 10% 1,700,000 9% Compute Interest to Capitalize and Expense Journal Entry in Year 1 Journal Entries in Year 2

Computing and Recording Interest Capitalization The following information is from Bowin Inc. for a long-term construction project that is expected to be completed in January of next year. The construction project is for a building intended for the company's own use. The capital expenditure on January 1 of the current year is for the purchase of land for the building site. No new construction loans were opened for the project during the year. All debt was outstanding for the full year. Capital Expenditures for Current Year Actual Expenditures Date Jan. 1 Mar. 31 June 30 Nov. 30 $102,000 3,060,000 6,120,000 3,060,000 Outstanding Debt in Current Year Debt Note payable Note payable Bond payable Note payable Debt Amount Interest Rate $3,400,000 8% 2,720,000 8% 6,800,000 10% 1,700,000 9% Compute Interest to Capitalize and Expense Journal Entry in Year 1 Journal Entries in Year 2

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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