Answered step by step
Verified Expert Solution
Question
1 Approved Answer
On January 15, 2020 a company started constructing an office building and it was not yet complete at their fiscal year end of December 31,
On January 15, 2020 a company started constructing an office building and it was not yet complete at their fiscal year end of December 31, 2020. The office building is a qualifying asset and the company has decided to implement the borrowing cost standard. The direct cost incurred on the construction project in 2020 was as follows: January 15 February 28 May 1 July 30 October 30 $150,000 240,000 280,000 96,000 220,000 All of the costs have been debited to the Construction in progress account. The company took a loan for the project of $450,000 on February 28. The annual interest rate is 5%. The company's existing borrowings are a bank loan of $3,000,000 at 4% and a note payable of $300,000 with a 4.5% interest rate. The bank loan was taken out on April 1, 2020. The total cost of the project should be recorded in a long-term asset account "Building under construction." Required Prepare the necessary adjusting entries at December 31, 2020 to record the asset and the capitalization of borrowing costs
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