Anderson company constructed a building during the year. The building was constructed on land purchased last...

 

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Anderson company constructed a building during the year. The building was constructed on land purchased last year at a cost of $150,000. Construction began on Feb. 1 & was completed on Nov. 1. The payments to the contractor were as follows. Date Payment 2/1 $120,000 6/1 360,000 9/1 480,000 11/1 100,000 To finance construction of the building, a $600,000, 12% construction loan was taken out on February 1. The loun was repaid on November 1. The firm had $200,000 of other outstanding debt during the year at a borrowing rate of 8%. Instructions: a) Calculate the amount of interest that should be capitalized. b) Record the acquisition of the asset. Hint: The journal entry should record the land, building, interest, and cash paid in interest. Anderson company constructed a building during the year. The building was constructed on land purchased last year at a cost of $150,000. Construction began on Feb. 1 & was completed on Nov. 1. The payments to the contractor were as follows. Date Payment 2/1 $120,000 6/1 360,000 9/1 480,000 11/1 100,000 To finance construction of the building, a $600,000, 12% construction loan was taken out on February 1. The loun was repaid on November 1. The firm had $200,000 of other outstanding debt during the year at a borrowing rate of 8%. Instructions: a) Calculate the amount of interest that should be capitalized. b) Record the acquisition of the asset. Hint: The journal entry should record the land, building, interest, and cash paid in interest.

Answer rating: 100% (QA)

Date Payment Payment Interest month Interest 01Feb 120000 120000 9 10800 0... View the full answer