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

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

b. Present journal entries for interest for the year.

c. Early in Year 3, Samson completed the plant and put it to work. Average Construction-
in-Process for Year 3 was $10 million. Present journal entries for Year 3 related to interest expense and interest capitalization.

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