Question
On April 1, 2018, Powell hired a contractor to construct a new warehouse. The construction work commenced on June 1, 2018, and it is expected
On April 1, 2018, Powell hired a contractor to construct a new warehouse. The construction work commenced on June 1, 2018, and it is expected to continue through May 31, 2019. Powell made progress payments to the contractor in 2018 as follows:
| Date | Amount |
| June 1 | $ 123,000 |
| July 1 | 174,000 |
| September 1 | 81,000 |
| November 1 | 33,000 |
|
| $411,000 |
As stated previously, Powell took a 1-year, 8%, $175,000 construction loan to help fund the work on this project. The company also has a 4-year, 5%, $654,350 loan that is not related to the construction project.
Give the adjusting entry needed at December 31, 2018 to record the capitalization of interest for this project.
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