Zamphir Jets manufactures luxury jets for corporate use. Its main production line is devoted to manufacturing the Z$1$ jet, which is its standardized product offering. At any point in time, $20$ to $30$ Z$1$s$,$ which take $18$ months to manufacture, are in production. The company also occasionally manufactures custom orders, where the purchaser specifies the size of fuselage, engine type, cargo capacity, cabin layout, colour schemes, and other features. Zamphir only manufactures one customized jet $($the Z$2)$ at a time, due to capacity issues, and as it takes about $21/2$

years to complete an order.

Interest costs for the month directly attributable to production were $$100,000$ for the Z$1$ and $$7,000$ for the Z$2.$ These amounts were paid in cash to two different lenders.

Required:

Prepare the journal entries to record interest costs assuming Zamphir prepares its financial statements in accordance with ASPE and elects to capitalize the interest costs.

Prepare the journal entries to record interest costs assuming Zamphir prepares its financial statements in accordance with ASPE and elects to expense the interest costs.

Briefly explain how accounting for interest costs of this nature differ between ASPE and IFRS.

Answer rating: 100% (QA)

Journal Entries to Capitalize Interest Costs ASPE 1 Capitalization of ... View the full answer