On April 1, 2553, Green Energy Solutions Inc. contracted Wind Power Dynamics to install wind turbines for
Question:
On April 1, 2553, Green Energy Solutions Inc. contracted Wind Power Dynamics to install wind turbines for $1,500,000. Green Energy 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, 2553. Green Energy Solutions Inc. had the following outstanding debt as of December 31, 2553:
i) 10% three-year note to finance the installation, dated April 1, 2553, with interest payable annually on December 31. Principal amount: $800,000. ii) 6% five-year note payable, dated April 1, 2550, with interest payable annually on December 31. Principal amount: $700,000.
Required: i) Determine the amount of interest to be capitalized in 2553 in relation to the wind turbine installation. (6 marks) ii) Prepare journal entries for Green Energy Solutions Inc. during 2553.
Intermediate Accounting
ISBN: 978-1119048541
11th Canadian edition Volume 2
Authors: Donald E. Kieso, Jerry J. Weygandt, Terry D. Warfield, Nicola M. Young, Irene M. Wiecek, Bruce J. McConomy