On July 1, 2463, Sustainable Living Solutions Inc. contracted Solar Energy Dynamics to install solar panels for
Question:
On July 1, 2463, Sustainable Living Solutions Inc. contracted Solar Energy Dynamics to install solar panels for $700,000. Sustainable Living Solutions Inc. made payments for the installation as follows: August 1, $200,000, November 1, $300,000, February 1, $200,000. The installation was completed, and the solar panels were operational on February 28, 2464. Sustainable Living Solutions Inc. had the following outstanding debt as of December 31, 2464:
i) 10% four-year note to finance the installation, dated July 1, 2463, with interest payable annually on December 31. Principal amount: $400,000. ii) 6% six-year note payable, dated July 1, 2460, with interest payable annually on December 31. Principal amount: $300,000.
Required: i) Determine the amount of interest to be capitalized in 2464 in relation to the solar panel installation. (6 marks) ii) Prepare journal entries for Sustainable Living Solutions Inc. during 2464.
Intermediate Accounting
ISBN: 978-0071339476
Volume 1, 6th Edition
Authors: Beechy Thomas, Conrod Joan, Farrell Elizabeth, McLeod Dick I