Question
On July 1, 2680, Sustainable Living Solutions Inc. contracted Solar Energy Dynamics to install solar panels for $700,000. Sustainable Living Solutions Inc. made payments for
On July 1, 2680, 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, 2681. Sustainable Living Solutions Inc. had the following outstanding debt as of December 31, 2681:
i) 10% four-year note to finance the installation, dated July 1, 2680, with interest payable annually on December 31. Principal amount: $400,000. ii) 6% six-year note payable, dated July 1, 2677, with interest payable annually on December 31. Principal amount: $300,000.
Required: i) Determine the amount of interest to be capitalized in 2681 in relation to the solar panel installation. (6 marks) ii) Prepare journal entries for Sustainable Living Solutions Inc. during 2681.
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