Question
On February 10, 2017, Wilson Co. hired DEB Co. to construct a new headquarters building. The construction work commenced on May 1, 2017, and it
On February 10, 2017, Wilson Co. hired DEB Co. to construct a new headquarters building. The construction work commenced on May 1, 2017, and it is expected to continue through April 30, 2019. Wilson made progress payments to the contractor in 2017 as follows:
| Date | Amount |
| May 1 | $ 376,000 |
| June 1 | 621,000 |
| October 1 | 295,000 |
| December 1 | 763,000 |
|
| $2,055,000 |
Wilson took a $595,000 construction loan on May 1, 2017. The loan principal is due in full on April 30, 2019. Interest on the loan is incurred at the annual rate of 6%, payable monthly starting May 31, 2017. In addition to the construction loan, Wilson had the following debt outstanding throughout 2017:
| Description | Principal |
| 2-year, 7% note payable with interest payable annually | $350,000 |
| 5-year, 11% note payable with interest payable annually | $900,000 |
REQUIRED: Compute the interest to be capitalized by Wilson for 2017. Also, give the adjusting entry to record Wilsons capitalization of interest.
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started
Managerial Accounting
Authors: Harold M. Sollenberger, Arnold Schneider, Lane K. Anderson
9th Edition
0538842822, 978-0538842822
