E9.9 (LO 2) (Capitalization of Interest) On December 31, 2024, Main Inc. borrowed $3,000,000 at 12% payable annually to finance the construction of a new building. In 2025, the company made the following expenditures related to this building: March 1, $360,000; June 1, $600,000; July 1, $1,500,000; December 1 $1,500,000. The building was completed in February 2026. Additional information is provided as follows. 1. Other debt outstanding: 10-year, 13% bond, December 31, 2018, interest payable annually 6-year, 10% note, dated December 31, 2022, interest payable annually 2. March 1, 2025, expenditure included land costs of $150,000. 3. Interest revenue of $49,000 earned in 2025. Instructions $4,000,000 1,600,000 a. Determine the amount of interest to be capitalized in 2025 in relation to the construction of the building. b. Prepare the journal entry to record the capitalization of interest and the recognition of interest expense, if any, at December 31, 2025.

E9.9 (LO 2) (Capitalization of Interest) On December 31, 2024, Main Inc. borrowed $3,000,000 at 12% payable annually to finance the construction of a new building. In 2025, the company made the following expenditures related to this building: March 1, $360,000; June 1, $600,000; July 1, $1,500,000; December 1 $1,500,000. The building was completed in February 2026. Additional information is provided as follows. 1. Other debt outstanding: 10-year, 13% bond, December 31, 2018, interest payable annually 6-year, 10% note, dated December 31, 2022, interest payable annually 2. March 1, 2025, expenditure included land costs of $150,000. 3. Interest revenue of $49,000 earned in 2025. Instructions $4,000,000 1,600,000 a. Determine the amount of interest to be capitalized in 2025 in relation to the construction of the building. b. Prepare the journal entry to record the capitalization of interest and the recognition of interest expense, if any, at December 31, 2025.

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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