Question

Company Corp. is constructing a building. The following information pertains to the construction of the building. Use the given Excel spreadsheet to prepare journal entries and move amounts to the general ledger. Afterwards, prepare the trial balances on the last tab of the Excel file. Submit only 1 Excel file per group. This set of entries is due 10/24/2016 at midnight.

1) On 1/1/2016, company borrows $2,000,000 at 12% for 8 years to finance the new construction project. Payments are due quarterly with the first due date falling on 3/31/2016. Prepare the journal entries for each quarter’s payment.

2) Expenditures made on the project during 2015 are as follows: 1/1/2016 of $300,000; 5/1/2016 of $400,000; 7/1/2016 of $1,100,000; 10/1/2016 of $400,000. Journalize these capital expenditures.

3) Make the adjusting entry for capitalization of interest. Put any capitalized interest in the PP&E Subledger as Work-in-Process. Company Corp has $4,500,000 of general debt outstanding at 11% during 2016.

Answer 1

1) 3/31/2016

Interest payable A/c Dr. 60,000

To Bank/Cash A/c. 60,000

( Interest paid for first quarter ) ( 2,000,000*12% /4 )

2) 1/1/2016

Building A/c Dr. 300,000

To Bank/Cash A/c 300,000

( Capitalised for construction of building )

( Note : here same 3 entries will be passed with above mentioned amounts in the question as dates are different )

3) Interest Payable A/c Dr. 60,000

To PPE ( work in progress ) A/c 60,000

( Capitalisation of interest )

4) 12/31/2016

Interest A/c Dr. 495,000

To interest on loan payable A/c 495,000

( Interest on general debt is due ) (4,500,000*11%)