On December 31, 2024, Oriole Inc. borrowed $4,200,000 at 13% payable annually to finance the construction of a new building. In 2025, the company made the following expenditures related to this building: March 1, $504,000; June 1, $840,000; July 1, $2,100,000; December 1, $2,100,000. The building was completed in February 2026. Additional information is provided as follows. 1. Other debt outstanding: 10-year, 14% bond, December 31, 2018, interest payable annually 6-year, 11% note, dated December 31, 2022, interest payable annually $5,600,000 2,240,000 2. March 1, 2025, expenditure included land costs of $210,000. 3. Interest revenue of $68,600 earned in 2025. (a) (b) Your Answer Correct Answer (Used) Determine the amount of interest to be capitalized in 2025 in relation to the construction of the building. The amount of interest $ 277,550 Your Answer Correct Answer (Used) Prepare the journal entry to record the capitalization of interest and the recognition of interest expense, if any, at December 31, 2025. (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 O for the amounts. List all debit entries before credit entries.)
On December 31, 2024, Oriole Inc. borrowed $4,200,000 at 13% payable annually to finance the construction of a new building. In 2025, the company made the following expenditures related to this building: March 1, $504,000; June 1, $840,000; July 1, $2,100,000; December 1, $2,100,000. The building was completed in February 2026. Additional information is provided as follows. 1. Other debt outstanding: 10-year, 14% bond, December 31, 2018, interest payable annually 6-year, 11% note, dated December 31, 2022, interest payable annually $5,600,000 2,240,000 2. March 1, 2025, expenditure included land costs of $210,000. 3. Interest revenue of $68,600 earned in 2025. (a) (b) Your Answer Correct Answer (Used) Determine the amount of interest to be capitalized in 2025 in relation to the construction of the building. The amount of interest $ 277,550 Your Answer Correct Answer (Used) Prepare the journal entry to record the capitalization of interest and the recognition of interest expense, if any, at December 31, 2025. (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 O for the amounts. List all debit entries before credit entries.)
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:On December 31, 2024, Oriole Inc. borrowed $4,200,000 at 13% payable annually to finance the construction of a new building. In
2025, the company made the following expenditures related to this building: March 1, $504,000; June 1, $840,000; July 1,
$2,100,000; December 1, $2,100,000. The building was completed in February 2026. Additional information is provided as follows.
1.
Other debt outstanding:
10-year, 14% bond, December 31, 2018, interest payable annually
6-year, 11% note, dated December 31, 2022, interest payable annually
$5,600,000
2,240,000
2.
March 1, 2025, expenditure included land costs of $210,000.
3.
Interest revenue of $68,600 earned in 2025.
(a)
(b)
Your Answer Correct Answer (Used)
Determine the amount of interest to be capitalized in 2025 in relation to the construction of the building.
The amount of interest
$
277,550
Your Answer
Correct Answer (Used)
Prepare the journal entry to record the capitalization of interest and the recognition of interest expense, if any, at December 31,
2025. (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 O for the amounts. List all debit entries before credit entries.)
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