On December 31, 2014, Tsang Inc. borrowed HK($3),000,000 at 12% payable annually to finance the construction of

Question:

On December 31, 2014, Tsang Inc. borrowed HK\($3\),000,000 at 12% payable annually to finance the construction of a new building. In 2015, the company made the following expenditures related to this building: March 1, HK\($360\),000; June 1, HK\($600\),000; July 1, HK\($1\),500,000;

December 1, HK\($1\),200,000. Additional information is provided as follows.

1. Other debt outstanding 10-year, 11% bond, December 31, 2008, interest payable annually HK\($4\),000,000 6-year, 10% note, dated December 31, 2012, interest payable annually HK\($1\),600,000 2. March 1, 2015, expenditure included land costs of HK\($150\),000 3. Interest revenue earned in 2015 on funds related to specific borrowing HK\($49\),000 Instructions

(a) Determine the amount of interest to be capitalized in 2015 in relation to the construction of the building.

(b) Prepare the journal entry to record the capitalization of interest and the recognition of interest expense, if any, at December 31, 2015.

Fantastic news! We've Found the answer you've been seeking!

Step by Step Answer:

Related Book For  book-img-for-question

Intermediate Accounting IFRS Edition

ISBN: 9781118443965

2nd Edition

Authors: Donald E. Kieso, Jerry J. Weygandt, Terry D. Warfield

Question Posted: