Amount of interest capitalized during construction. Samson Chemical Company builds some of its own chemical-processing plants. At the start of Year 5 the Construction-in-Process account had a balance of $\$ 40$ million. Construction activity occurred uniformly throughout the year. At the end of Year 5 the balance was $\$ 60$ million. The outstanding borrowings of the company during the year were as follows:

a. Compute the amount of interest capitalized in the Construction-in-Process account for Year 5.

b. Present journal entries for interest for Year 5.

c. On December 31, Year 7, Samson completed the plant and put it to work. Average Construction-in-Process for Year 7 was $\$ 110$ million. The debt listed above remained outstanding throughout the construction project and the firm did not issue any additional interest-bearing debt during this time. Present journal entries for Year 7 related to interest expense and interest capitalization.

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New Construction Loans at 10 Percent per Year. Old Bond Issues Averaging 8 Percent Rate Total Interest-Bearing Debt.. .... $ 30,000,000 70,000,000 $100,000,000