On December 21, 2013, Jumble Inc. borrowed \$1,000,000 at 10% payable annually to finance the construction of a new building. In 2014, the company made the following expenditures realated to this building.Jun-1    \$400,000July-1    \$600,000Sep-1    \$1,200,000Dec-1   \$600,000The building was completed in April 2015. Additional information is provided as follows:1) other debt outstanding:10-year, 8% bond dated December 31,2012, interest payable annually \$10,000,00015-year, 10% note, dated December 31, 2012, interest payable annually \$2,500,0002) Interest revenue earned in 2014                  \$6,000INSTRUCTIONS: A) Determine the amount of interest to be capitalized in 2014 in relation to the construction of the buildingB) Prepare the journal entry to record the capitalization of interest and the recognition of interest expense, if any, at December 31, 2014

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On December 21, 2013, Jumble Inc. borrowed \$1,000,000 at 10% payable annually to finance the construction of a new building. In 2014, the company made the following expenditures realated to this building.

Jun-1    \$400,000

July-1    \$600,000

Sep-1    \$1,200,000

Dec-1   \$600,000

The building was completed in April 2015. Additional information is provided as follows:

1) other debt outstanding:

10-year, 8% bond dated December 31,2012, interest payable annually \$10,000,000

15-year, 10% note, dated December 31, 2012, interest payable annually \$2,500,000

2) Interest revenue earned in 2014                  \$6,000

INSTRUCTIONS:

A) Determine the amount of interest to be capitalized in 2014 in relation to the construction of the building

B) Prepare the journal entry to record the capitalization of interest and the recognition of interest expense, if any, at December 31, 2014

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Step 1

A.

Step 1:

Detemine the amount of weighted average accumulated depreciation.

Step 2

Step 2:

Determine the weighted average interest rate :

Step 3

Step 3:

Determine the amount of inte...

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