Question

Company Corp. is constructing a building. The following information pertains to the construction of the building. prepare journal entries 1) On 1/1/2015, company borrows $2,400,000 at 12% for 8 years to finance the new construction project. Payments are due quarterly with the first due date falling on 3/31/2015. Prepare the journal entries for each quarter’s payment. 2) Expenditures made on the project during 2015 are as follows: 1/1/2015 of $300,000; 5/1/2015 of $400,000; 7/1/2015 of $1,100,000; 10/1/2015 of $400,000. Journalize these capital expenditures. 3) Make the adjusting entry for capitalization of interest. Put the capitalized interest in the PP&E Subledger. Company Corp has $4,500,000 of general debt outstanding at 11% during 2015.

Answer 1

First Qtr	(Amount in $)
Date	Particulars	Dr	Cr
31.3.15	Interest A/c	72000
	Interest Payable A/c		72000
	(Being Interest Due For Qtr ending 31.03.2015)
	Interest Payable A/c	72000
	Bank A/c		72000
	(Being Interest paid to bank on due date)
	Cost of Project A/c	72000
	Interest		72000
	(Being Interest Capitalised to cost of Project)
	and same as on 2nd ,, 3rd and …..)
xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx
	2)	Dr	Cr
1.1.15	Assets A/c	300000
	Bank A/c		300000
5.1.15	Assets A/c	400000
	Bank A/c		400000
7.1.15	Assets A/c	1100000
	Bank A/c		1100000
10.1.15	Assets A/c	400000
	Bank A/c		400000
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
	3)
	Capitalisation of interest
	Interest A/c	495000
	Interest Payable A/c		495000
	Interest Payable A/c	495000
	Bank A/c		495000
	Cost of Project A/c	495000
	Interest		495000