. Hermandez Inc. began to construct a building for its use on January 1, 2020. All costs...

 

 

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Hermandez Inc. began to construct a building for its use on January 1, 2020. All costs associated with the construction are being debited to an account called "Construction-in- Progress." The construction will take approximately 18 months Weighted-average expenditures for 2020 have already been determined to be $5,000,000. The company has one specific, as well as two non-specific loan borrowings. Details are as follows: Specific Loan Borrowing: $3,000,000 loan at 11% taken out 1/1/2020 and due in 2023. Non-specific Borrowings • Note #1: $2.000,000 at 9%. This loan was outstanding for all of 2020 and is due in 2022. o Note #2: $3,000,000 at 12%. This loan was outstanding for all of 2020 and is due in 2023. Part A: What portion of the interest on all of its loans should be capitalized in 2020? Important: Round interest rates to two decimal places when expressed as a percentage (ex. 114321 = 11.43%) Answer: $ Part B: If the company has already accrued and paid the 2020 interest costs on these three loans by debiting "Interest Expense" and crediting "Cash", what should be the adjusting journal entry it makes on 12/31/20 to capitalize the interest amount calculated in Part A? 12/31/20 Debit Credit Hermandez Inc. began to construct a building for its use on January 1, 2020. All costs associated with the construction are being debited to an account called "Construction-in- Progress." The construction will take approximately 18 months Weighted-average expenditures for 2020 have already been determined to be $5,000,000. The company has one specific, as well as two non-specific loan borrowings. Details are as follows: Specific Loan Borrowing: $3,000,000 loan at 11% taken out 1/1/2020 and due in 2023. Non-specific Borrowings • Note #1: $2.000,000 at 9%. This loan was outstanding for all of 2020 and is due in 2022. o Note #2: $3,000,000 at 12%. This loan was outstanding for all of 2020 and is due in 2023. Part A: What portion of the interest on all of its loans should be capitalized in 2020? Important: Round interest rates to two decimal places when expressed as a percentage (ex. 114321 = 11.43%) Answer: $ Part B: If the company has already accrued and paid the 2020 interest costs on these three loans by debiting "Interest Expense" and crediting "Cash", what should be the adjusting journal entry it makes on 12/31/20 to capitalize the interest amount calculated in Part A? 12/31/20 Debit Credit

Answer rating: 100% (QA)

Part A Weighted average rate for other debt Amount Mul... View the full answer