1. On December 31, 2019, Skysong Inc. borrowed $3,120,000 at 12% payable annually to finance the construction of a new building. In 2020, the company made the following expenditures related to this building: March 1, $374,400; June 1, $624,000; July 1, $1,560,000; December 1, $1,560,000. The building was completed in February 2021. Additional information is provided as follows.

One. Other debt outstanding

10-year, 13% bond, December 31, 2013, interest payable annually $4,160,000

6-year, 10% note, dated December 31, 2017, interest payable annually. $1,664,000

Two. March 1, 2020, expenditure included land costs of $156,000

Three. Interest revenue earned in 2020 - $50,960

a. Determine the amount of interest to be capitalized in 2020 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, 2020.

2. Skysong Inc. exchanged equipment used in its manufacturing operations plus $4,440 in cash for similar equipment used in the operations of Larkspur Company. The following information pertains to the exchange.

Skysong Inc. Larkspur Co.

Equipment Cost $41,440 $41,440

Accumulated Dep. 28,120 14,800

Fair Value of Equip. 18,500 22,940

Cash Given Up 4,440

a. Prepare the journal entries to record the exchange on the books of both companies. Assume that the exchange lacks commercial substance. (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 0 for the amounts.)

b. Prepare the journal entries to record the exchange on the books of both companies. Assume that the exchange has commercial substance. (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 0 for the amounts.)