On September 1, 2374, EcoTech Solutions Inc. contracted Solar Power Innovations to install solar panels for $800,000.
Question:
On September 1, 2374, EcoTech Solutions Inc. contracted Solar Power Innovations to install solar panels for $800,000. EcoTech Solutions Inc. made payments for the installation as follows: October 1, $200,000, December 1, $400,000, March 1, $200,000. The installation was completed, and the solar panels were operational on March 31, 2375. EcoTech Solutions Inc. had the following outstanding debt as of December 31, 2375:
i) 10% four-year note to finance the installation, dated September 1, 2374, with interest payable annually on December 31. Principal amount: $500,000. ii) 6% six-year note payable, dated September 1, 2371, with interest payable annually on December 31. Principal amount: $300,000.
Required: i) Determine the amount of interest to be capitalized in 2375 in relation to the solar panel installation. (6 marks) ii) Prepare journal entries for EcoTech Solutions Inc. during 2375.
Intermediate Accounting
ISBN: 978-0071339476
Volume 1, 6th Edition
Authors: Beechy Thomas, Conrod Joan, Farrell Elizabeth, McLeod Dick I