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 $4,000,000 2. 6-year, 10% note, dated December 31, 2022, interest payable annually 1,600,000 3. March 1, 2025, expenditure included land costs of $150,000. Interest revenue of $49,000 earned in 2025. Instructions: Prepare the journal entry to record the capitalization of interest and the recognition of interest expense, if any, at December 31, 2025.
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
$4,000,000
2. 6-year, 10% note, dated December 31, 2022, interest payable annually
1,600,000
3. March 1, 2025, expenditure included land costs of $150,000.
Interest revenue of $49,000 earned in 2025.
Instructions: Prepare the
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