Reference no: EM132344798

Question

During 2018, the COYOTE Company spent $4,000,000 for various construction projects which are qualified for capitalization of interest. The total expenditures of $4,000,000 were made as follows: $1,000,000 on 1/1/2018, $2,000,000 on 4/1/2018, and $1,000,000 on 10/1/2018. The company had the following debts outstanding as of December 31, 2018:

1. 6%, 5-year note to finance construction of various assets, dated January 1, 2017, with interest payable annually on each January 1. $1,500,000

2. 8%, 15-year bonds issued at par on December 31, 2015, with interest payable annually on each December 31 $2,000,000

3. 10%, 10-year note payable, dated January 1, 2017, with interest payable annually on each January 1 $4,000,000

Instructions: Prepare the journal entries for the asset qualifying for capitalization of interest, interest expense, and interest payment on December 31, 2018.