Question
On April 1, 2035, GreenTech Solutions Inc. contracted Wind Power Dynamics to install wind turbines for $1,500,000. GreenTech Solutions Inc. made payments for the installation
On April 1, 2035, GreenTech Solutions Inc. contracted Wind Power Dynamics to install wind turbines for $1,500,000. GreenTech Solutions Inc. made payments for the installation as follows: May 1, $400,000, August 1, $600,000, December 1, $500,000. The installation was completed, and the turbines were operational on December 31, 2035. GreenTech Solutions Inc. had the following outstanding debt as of December 31, 2035:
i) 10% three-year note to finance the installation, dated April 1, 2035, with interest payable annually on December 31. Principal amount: $800,000. ii) 6% five-year note payable, dated April 1, 2032, with interest payable annually on December 31. Principal amount: $700,000.
Required: i) Determine the amount of interest to be capitalized in 2035 in relation to the wind turbine installation. (6 marks) ii) Prepare journal entries for GreenTech Solutions Inc. during 2035.
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