Urmila ben On December 31, 2023, Novak Inc., a public company, borrowed $3 million at 10% payable annually to finance the construction of anew building. In 2024, the company made the following expenditures related to this building structure: March 1, $516,000; June 1,$612,000; July 1, $1.5 million (of which $390,000 was for the roof); December 1, $1.5 million (of which $738,000 was for the buildingHVAC).Additional information follows:1.2.3.Other debt outstanding:$3-million, 10-year, 12% bond, dated December 31, 2016, with interest payable annually$1.5-million, six-year, 10% note, dated December 31, 2020, with interest payable annuallyThe March 1, 2024 expenditure included land costs of $156,000.Interest revenue earned in 2024 on the unused idle construction loan amounted to $54,000.Prepare the journal entry to record the capitalization of borrowing costs and the recognition of interest expense, if any, atDecember 31, 2024. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry isrequired, select "No Entry" for the account titles and enter O for the amounts. List all debit entries before credit entries. Do not roundintermediate calculations. Round capitalization rate to 2 decimal places, e.g. 52.75% and final answers to O decimal places, e.g. 5,275.)Account Titles and ExplanationBuildings-StructureInterest ExpenseBuildings-RoofBuildings-HVACCashDebitCredit1000

To determine the amount of borrowing costs to be capitalized, we need to calculate the weighted…

Prepare the journal entry to record the capitalization of borrowing costs and the recognition of interest expense, if any, at December 31, 2024. (Credit account titles are automatically indented when the 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. Do not round intermediate calculations. Round capitalization rate to 2 decimal places, e.g. 52.75% and final answers to O decimal places, e.g. 5,275.)

Prepare the journal entry to record the capitalization of borrowing costs and the recognition of interest expense, if any, at December 31, 2024. (Credit account titles are automatically indented when the 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. Do not round intermediate calculations. Round capitalization rate to 2 decimal places, e.g. 52.75% and final answers to O decimal places, e.g. 5,275.)

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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