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Prepare journal entry to capitalize the interest at december

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Question - On January 2, 2019, Siloam Farms Inc. began construction of an automated Cattle Feeder System. The system was finished and ready for use on September 30, 2020. Expenditures on the project were as follows:

January 2, 2019 $500,000

July 1, 2019 $400,000

December 31, 2019 $300,000

March 31, 2020 $300,000

September 30, 2020 $200,000

The company borrowed $600,000 on a construction loan at 12% interest on January 2, 2019. In addition, the company had $450,000 in 10% bonds and $550,000 in 8% bonds outstanding during 2019 and 2020.

Required -

1. Calculate the following items for 2019 and 2020:

a. Average accumulated expenditures

b. Amount of interest capitalized and expensed.

c. Balance of the Cattle Feeder System account at the end of 2020.

2. Prepare the journal entry to capitalize the interest at December 31, 2019.

Reference no: EM132538165

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