Bob Company is constructing a building. Construction began on January 1 and was completed on December 31. Construction expenditures were $900,000 on April 1; $400,000 on June 30; $510,000 on September 1; and $120,000 on December 1. Bob Company borrowed $700,000 at 9% on January 1 to help finance construction of the building. In addition, the company had outstanding all year a 5%, 3-year, $100,000 note payable and a 6%, 2-year, $200,000 note payable.

Instructions

a) Determine the amount of interest costs to be capitalized.

b) Prepare the journal entry to be made at December 31 to record the interest capitalization.