Unproved property costs relative to the Williams lease were $40,000 at January 1, 2019. During 2019, $400,000

Question:

Unproved property costs relative to the Williams lease were $40,000 at January 1, 2019. During 2019, $400,000 of drilling costs were incurred on the Williams lease. An 8%, $500,000 note is outstanding during the entire year and was obtained to finance the drilling program.

REQUIRED: Compute the interest capitalization amount and record the interest.

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