Borrowing Costs On January 1, 2019, Carlson borrowed $3,000,000 at an interest rate of 5 percent to finance the construction of a new office building expected to cost $3,000,000. Carlson temporarily invested the proceeds until the cash was needed. Interest earned during 2019 was $6,000. During 2019, expenditures of $2,000,000 were incurred and the weighted-average expenditures were $1,500,000. The project will be completed and the loan will be paid in late 2020. An exchange gain of $5,000 was also recognized on the borrowing as a result of the differences in exchange rates in the United States and Great Britain. (Use US dollars as presented; no foreign exchange calculations are required). Also note that interest expense, related interest income, and exchange gain/loss have already been recorded in the income statement.

Required

How to recognize the adjustments in the income statement as well under IFRS and GAAP.

Answer rating: 100% (QA)

The interest expense will be recorded as an operating expense o... View the full answer