Question
On October 1, 2024, EcoTech Solutions contracted Blue Builders to construct a new energy-efficient factory for $4,500,000. EcoTech made payments for the construction as follows:
On October 1, 2024, EcoTech Solutions contracted Blue Builders to construct a new energy-efficient factory for $4,500,000. EcoTech made payments for the construction as follows: December 1, $800,000, February 1, $1,200,000, and December 31, $2,500,000. The construction was completed, and the factory was ready for operation on December 31, 2024. EcoTech had the following outstanding debt as of December 31, 2024:
i) A 11% three-year note to finance construction of the factory, dated December 31, 2023, with interest payable annually on December 31. Principal amount: $2,500,000.
ii) A 8% five-year note payable, dated December 31, 2021, with interest payable annually on December 31. Principal amount: $1,500,000.
iii) 10% ten-year bonds issued on December 31, 2019, with interest payable annually on December 31. Principal amount: $1,000,000.
Required:
i) Determine the amount of interest to be capitalized in 2024 in relation to the construction of the factory.
ii) Prepare journal entries for EcoTech Solutions during 2024.
Step by Step Solution
There are 3 Steps involved in it
Step: 1
![blur-text-image](https://dsd5zvtm8ll6.cloudfront.net/includes/images/document_product_info/blur-text-image.webp)
Get Instant Access with AI-Powered Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
![blur-text-image](https://dsd5zvtm8ll6.cloudfront.net/includes/images/document_product_info/blur-subtext-image.webp)
Step: 3
![blur-text-image](https://dsd5zvtm8ll6.cloudfront.net/includes/images/document_product_info/blur-subtext-image.webp)
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started