On January $1,$ Year $1,$ Romano Tire Service, Inc. signed a contract to have a new

service center built for $$900,000.$ On the same day, Romano borrowed $$400,000$

to finance the construction. This is an annual loan at a stated rate of $10\%.$

Other Debt existing on the books as of January $1,$ Year $1$:

$1)$ $ $500,000$ @ $9\%$

$2)$ $$1,000,000$ @ $12\%$

Expenditures made on the project during Year $1$ were as follows:

$1/1$ $$600,000$

$10/1$ $$200,000$

$$800,000$

$1)$ How much interest should be capitalized? Support how you came to that

conclusion.

$2)$ Record the journal entry to capitalize interest and pay interest for the year.

Answer rating: 100% (QA)

1 Calculation of Interest to be Capitalized To calculate the interest that should be capitalized we ... View the full answer