Question
On September 1, 2710, EcoTech Solutions Inc. contracted Solar Power Innovations to install solar panels for $800,000. EcoTech Solutions Inc. made payments for the installation
On September 1, 2710, 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, 2711. EcoTech Solutions Inc. had the following outstanding debt as of December 31, 2711:
i) 10% four-year note to finance the installation, dated September 1, 2710, with interest payable annually on December 31. Principal amount: $500,000. ii) 6% six-year note payable, dated September 1, 2707, with interest payable annually on December 31. Principal amount: $300,000.
Required: i) Determine the amount of interest to be capitalized in 2711 in relation to the solar panel installation. (6 marks) ii) Prepare journal entries for EcoTech Solutions Inc. during 2711.
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started