Question
On July 1, 2024, EcoFriendly Inc. contracted GreenBuilders to construct a new environmentally-conscious manufacturing plant for $3,200,000. EcoFriendly made payments for the construction as follows:
On July 1, 2024, EcoFriendly Inc. contracted GreenBuilders to construct a new environmentally-conscious manufacturing plant for $3,200,000. EcoFriendly made payments for the construction as follows: September 1, $600,000, November 1, $1,000,000, and December 31, $1,600,000. The construction was completed, and the manufacturing plant was ready for operation on December 31, 2024. EcoFriendly had the following outstanding debt as of December 31, 2024:
i) A 10% three-year note to finance construction of the manufacturing plant, dated December 31, 2023, with interest payable annually on December 31. Principal amount: $1,500,000.
ii) A 8% six-year note payable, dated December 31, 2021, with interest payable annually on December 31. Principal amount: $800,000.
iii) 9% ten-year bonds issued on December 31, 2019, with interest payable annually on December 31. Principal amount: $700,000.Required:
i) Determine the amount of interest to be capitalized in 2024 in relation to the construction of the manufacturing plant.
ii) Prepare journal entries for EcoFriendly Inc. during 2024.
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