On July 1, 2021, XYZ Corporation contracted ABC Builders to renovate their office space for $700,000. XYZ Corporation made payments for the renovation as follows: August 1, $200,000, October 1, $300,000, December 1, $200,000. The renovation was completed, and the office space was ready for use on December 31, 2021. XYZ Corporation had the following outstanding debt as of December 31, 2021:

i) 8% three-year note to finance the renovation, dated July 1, 2021, with interest payable annually on December 31. Principal amount: $400,000. ii) 5% six-year note payable, dated July 1, 2018, with interest payable annually on December 31. Principal amount: $300,000.

Required: i) Determine the amount of interest to be capitalized in 2021 in relation to the office renovation. (6 marks) ii) Prepare journal entries for XYZ Corporation during 2021.