(b) 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.) Date December 31, 2025 Account Titles and Explanation Debit Credit Show Attempt History Current Attempt in Progress On December 31, 2024, Waterway Inc. borrowed $4,140,000 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, $496,800; June 1, $828,000; July 1, $2,070,000; December 1, $2,070,000. 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 $5,520,000 6-year, 11% note, dated December 31, 2022, interest payable annually 2,208,000 2. March 1, 2025, expenditure included land costs of $207,000. 3. Interest revenue of $67,620 earned in 2025.

(b) 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.) Date December 31, 2025 Account Titles and Explanation Debit Credit Show Attempt History Current Attempt in Progress On December 31, 2024, Waterway Inc. borrowed $4,140,000 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, $496,800; June 1, $828,000; July 1, $2,070,000; December 1, $2,070,000. 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 $5,520,000 6-year, 11% note, dated December 31, 2022, interest payable annually 2,208,000 2. March 1, 2025, expenditure included land costs of $207,000. 3. Interest revenue of $67,620 earned in 2025.

Intermediate Accounting: Reporting And Analysis

3rd Edition

ISBN:9781337788281

Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Chapter10: Property, Plant And Equipment: Acquisition And Subsequent Investments

Section: Chapter Questions

Problem 18E

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(Capitalization of Borrowing Costs) In early February 2023, Huey Corp. began construction of an addition to its head office building that is expected to take 18 months to complete. The following 2023 expenditures relate to the addition: Feb. 1 120,000 Mar. 1 Payment to architect 24,000 July 1 Payment #1 to contractor $ Payment #2 to contractor 60,000 Dec. 1 Payment #3 to contractor 180, 000 Dec. 31 Asset carrying amount $384,000 On February 1, Huey issued a $100,000, three-year note payable at a rate of 12% to finance most of the initial payment to the contractor. No other asset-specific debt was entered into. Details of other interest-bearing debt during the period are provided in the table below: Other Debt Instruments Outstanding-2023 bonds, issued May 1, 2008, matured May 1, 2023 Principal Amount 9%, 15-year $300,000 7%, 10-year bonds, issued June 15, 2017 $500,000 6%, 12-year bonds, issued May 1, 2023 $300,000 Instructions What amount of interest should be capitalized for the…
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Interest During Construction Snowbird Company is constructing a building that qualifies for interest capitalization. It is built between January 1 and December 31, 2019. Snowbird made the following expenditures related to this building: April 1 $396,000 July 1 400,000 September 1 510,000 December 1 120,000 The company borrowed $500,000 at 12% to help finance the project. In addition, Snowbird had outstanding borrowings of $2 million at 8% and $1 million at 9%. Required: 1. Compute the amount of interest capitalized related to the construction of the building. Do not round your interim calculations. Round your final answer to the nearest dollar. 74,750 X 2. Next Level In the current period, the capitalization of interest decreases shareholders' equity decreases depreciation expense ; in future period the effect of capitalized interest is to
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