On December 31, 2011, Hurston Inc. borrowed $3,000,000 at 12% payable annually to finance the construction of

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On December 31, 2011, Hurston Inc. borrowed $3,000,000 at 12% payable annually to finance the construction of a new building. In 2012, the company made the following expenditures related to this building: March 1, $360,000; June 1, $600,000; July 1, $1,500,000; December 1, $1,200,000. Additional information is provided as follows.

    1. Other debt outstanding
        10-year, 11% bond, December 31, 2005, interest payable annually          $4,000,000
        6-year, 10% note, dated December 31, 2009, interest payable annually   $1,600,000
    2. March 1, 2012, expenditure included land costs of $150,000
    3. Interest revenue earned in 2012                                                                      $49,000

Instructions
  (a) Determine the amount of interest to be capitalized in 2012 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, 2012.

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Related Book For  book-img-for-question

Intermediate Accounting

ISBN: 978-0470587287

14th Edition

Authors: kieso, weygandt and warfield.

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