On December 31, 2021, Jordan Co. borrowed $1,500,000 at 12% payable annually to finance the construction of a new building. In 2022, the company made the following expenditures related to the building: 1-Mar 180,000 1-Jun 300,000 1-Jul 750,000 1-Dec 750,000 The building was completed in February 2023. Jordan had the following other debt outstanding: 10 year bond 13% Interest payable annually 2,000,000 6 year note 10% Interest payable annually 800,000 The March 1 expenditure included land costs of 75,000 Interest revenue earned during 2022 24,500 Determine the amount of interest capitalized in 2022 on this building. Prepare the journal entry to record the capitalization of interest and the recognition of interest expense if any at December 31, 2022.

STEP 1

DETERMINE IF THE ASSET QUALIFIES FOR CAPITALIZATION OF INTEREST DETERMINE THE CAPITALIZATION PERIOD COMPUTE THE WEIGHTED AVERAGE ACCUMULATED EXPENDITURES COMPUTE AVOIDABLE INTEREST COMPUTE ACTUAL INTEREST EXPENSE FOR THE YEAR CAPITALIZE WHICHEVER IS LESS - AVOIDABLE INTEREST OR ACTUAL INTEREST