Computing and Recording Interest Capitalization

Bullock Company is constructing a building for its own use and has been capitalizing interest based on average expenditures on a quarterly basis since the project began last year. The following expenditures are made during the first quarter: January 1, $3,640,000; February 1, $3,315,000; and March 31, $4,745,000. Bullock had the following debts outstanding during this quarter.

Debt	Amount
Note payable, 10%, incurred specifically to finance construction	$2,080,000
Short-term note payable, 15%	3,250,000
Mortgage note payable, 8%	1,560,000

Answer the following questions, rounding your answers to the nearest whole number. a. Compute interest to be capitalized and interest to be expensed for this first quarter.

Amount of interest to be capitalized	Answer
Amount of interest to expense	Answer

b. Prepare the entry to record the construction expenditures and the interest. Note: Record the debit accounts in alphabetical order using the first letter of the account name.

Account Name	Dr.	Cr.
AnswerCash and PayablesPrepaid InsuranceEquipmentBuildingLandConstruction in ProcessAccumulated DepreciationAccounts PayableProperty Tax PayableAsset Retirement ObligationNote PayableDiscount on Note PayableCommon StockPaid-in Capital in Excess of ParCommon StockContribution RevenueGain on Asset ExchangeAccretion ExpenseDepreciation ExpenseInsurance ExpenseInterest ExpenseRepair ExpenseLoss on Asset ExchangeLoss on Asset ReplacementLoss on Construction of BuildingLoss on DisposalLoss on Settlement of Asset Retirement ObligationN/A	Answer	Answer
AnswerCash and PayablesPrepaid InsuranceEquipmentBuildingLandConstruction in ProcessAccumulated DepreciationAccounts PayableProperty Tax PayableAsset Retirement ObligationNote PayableDiscount on Note PayableCommon StockPaid-in Capital in Excess of ParCommon StockContribution RevenueGain on Asset ExchangeAccretion ExpenseDepreciation ExpenseInsurance ExpenseInterest ExpenseRepair ExpenseLoss on Asset ExchangeLoss on Asset ReplacementLoss on Construction of BuildingLoss on DisposalLoss on Settlement of Asset Retirement ObligationN/A	Answer	Answer
AnswerCash and PayablesPrepaid InsuranceEquipmentBuildingLandConstruction in ProcessAccumulated DepreciationAccounts PayableProperty Tax PayableAsset Retirement ObligationNote PayableDiscount on Note PayableCommon StockPaid-in Capital in Excess of ParCommon StockContribution RevenueGain on Asset ExchangeAccretion ExpenseDepreciation ExpenseInsurance ExpenseInterest ExpenseRepair ExpenseLoss on Asset ExchangeLoss on Asset ReplacementLoss on Construction of BuildingLoss on DisposalLoss on Settlement of Asset Retirement ObligationN/A	Answer	Answer