On December 31, 2024, Vaughn Inc. borrowed $3,900,000 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, $468,000; June 1, $780,000, July 1, $1,950,000; December 1, $1,950,000. 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 March 1, 2025, expenditure included land costs of $195,000. 2 3. Interest revenue of $63,700 earned in 2025. $5,200,000 2,080,000

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
icon
Related questions
Question

nku.3

 

On December 31, 2024, Vaughn Inc. borrowed $3,900,000 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, $468,000; June 1, $780,000, July 1,
$1,950,000; December 1, $1,950,000. 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
March 1, 2025, expenditure included land costs of $195,000.
2.
3. Interest revenue of $63,700 earned in 2025,
$5,200,000
2,080,000
Transcribed Image Text:On December 31, 2024, Vaughn Inc. borrowed $3,900,000 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, $468,000; June 1, $780,000, July 1, $1,950,000; December 1, $1,950,000. 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 March 1, 2025, expenditure included land costs of $195,000. 2. 3. Interest revenue of $63,700 earned in 2025, $5,200,000 2,080,000
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.)
ite
r 31, 2025
Account Titles and Explanation
Interest Expense
Debit
Credit
Transcribed Image Text: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.) ite r 31, 2025 Account Titles and Explanation Interest Expense Debit Credit
Expert Solution
trending now

Trending now

This is a popular solution!

steps

Step by step

Solved in 3 steps with 2 images

Blurred answer
Knowledge Booster
Accounting for Borrowing costs
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.
Recommended textbooks for you
FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
Accounting
ISBN:
9781259964947
Author:
Libby
Publisher:
MCG
Accounting
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis…
Horngren's Cost Accounting: A Managerial Emphasis…
Accounting
ISBN:
9780134475585
Author:
Srikant M. Datar, Madhav V. Rajan
Publisher:
PEARSON
Intermediate Accounting
Intermediate Accounting
Accounting
ISBN:
9781259722660
Author:
J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:
McGraw-Hill Education
Financial and Managerial Accounting
Financial and Managerial Accounting
Accounting
ISBN:
9781259726705
Author:
John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:
McGraw-Hill Education