Li Corp. purchased a container load of antiques for resale at an invoice cost of $1,600,000. The goods were paid for when they were shipped in early June. The container arrived in Canada at the end of August, and then at Li's location, by rail, at the end of September. The goods were then available for sale. Freight costs of $168,000 were paid in October. Li has recorded $100,800 of total interest expense from $2,400,000 of general borrowing over the year. Required: Prepare the adjusting journal entry to capitalize borrowing costs on inventory at year-end December 31. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Do not round intermediate calculations.)
Li Corp. purchased a container load of antiques for resale at an invoice cost of $1,600,000. The goods were paid for when they were shipped in early June. The container arrived in Canada at the end of August, and then at Li's location, by rail, at the end of September. The goods were then available for sale. Freight costs of $168,000 were paid in October. Li has recorded $100,800 of total interest expense from $2,400,000 of general borrowing over the year. Required: Prepare the adjusting journal entry to capitalize borrowing costs on inventory at year-end December 31. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Do not round intermediate calculations.)
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:Li Corp. purchased a container load of antiques for resale at an invoice cost of $1,600,000. The goods were paid for when they were
shipped in early June. The container arrived in Canada at the end of August, and then at Li's location, by rail, at the end of September.
The goods were then available for sale. Freight costs of $168,000 were paid in October. Li has recorded $100,800 of total interest
expense from $2,400,000 of general borrowing over the year.
Required:
Prepare the adjusting journal entry to capitalize borrowing costs on inventory at year-end December 31. (If no entry is required for a
transaction/event, select "No journal entry required" in the first account field. Do not round intermediate calculations.)
Answer is complete but not entirely correct.
No
Transaction
General Journal
Debit
Credit
1
1
Inventory
100,800 X
Accounts payable
100,800 X
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