Question

On December 31, 2019, Coronado Inc. borrowed $4,260,000 at 12% payable annually to finance the construction of a new building. In 2020, the company made the following expenditures related to this building: March 1, $511,200; June 1, $852,000; July 1, $2,130,000; December 1, $2,130,000. The building was completed in February 2021. Additional information is provided as follows.

1.		Other debt outstanding
		10-year, 13% bond, December 31, 2013, interest payable annually		$5,680,000
		6-year, 10% note, dated December 31, 2017, interest payable annually		$2,272,000
2.		March 1, 2020, expenditure included land costs of $213,000
3.		Interest revenue earned in 2020		$69,580

Determine the amount of interest to be capitalized in 2020 in relation to the construction of the building.

The amount of interest

$

B. Prepare the journal entry to record the capitalization of interest and the recognition of interest expense, if any, at December 31, 2020

Answer 1

Date	Amount	No of Months	Total Months	WACC ( Amount* no of months / total Months)
1-Mar	511200	10	12	426000
1-Jun	852000	7	12	497000
1-Jul	2130000	6	12	1065000
1-Dec	2130000	1	12	177500
			Total	2165500

Interest of borrowed
	2165500	12%	259860
	Avoidable Interest		259860

Actual Interest
	4260000	12%	511200
	5680000	13%	738400
	2272000	10%	227200
			1476800

Part B
Date	Description	Debit	Credit
2019	Building	259860
	Interest Expenses	1216940
	Cash		1476800