On December 31, 2023, Novak Inc., a public company, borrowed $3 million at 10% payable annually to finance the construction of a new building. In 2024, the company made the following expenditures related to this building structure: March 1, $516,000; June 1, $612,000; July 1, $1.5 million (of which $390,000 was for the roof); December 1, $1.5 million (of which $738,000 was for the buildin HVAC). Additional information follows: 1. 2. 3. Other debt outstanding: $3-million, 10-year, 12% bond, dated December 31, 2016, with interest payable annually $1.5-million, six-year, 10% note, dated December 31, 2020, with interest payable annually The March 1, 2024 expenditure included land costs of $156,000. Interest revenue earned in 2024 on the unused idle construction loan amounted to $54,000. Prepare the journal entry to record the capitalization of borrowing costs and the recognition of interest expense, if any, at December 31, 2024. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter O for the amounts. List all debit entries before credit entries. Do not round intermediate calculations. Round capitalization rate to 2 decimal places, e.g. 52.75% and final answers to O decimal places, e.g. 5,275.) Account Titles and Explanation Buildings-Structure Interest Expense Buildings-Roof Buildings-HVAC Cash Debit Credit 1000
On December 31, 2023, Novak Inc., a public company, borrowed $3 million at 10% payable annually to finance the construction of a new building. In 2024, the company made the following expenditures related to this building structure: March 1, $516,000; June 1, $612,000; July 1, $1.5 million (of which $390,000 was for the roof); December 1, $1.5 million (of which $738,000 was for the buildin HVAC). Additional information follows: 1. 2. 3. Other debt outstanding: $3-million, 10-year, 12% bond, dated December 31, 2016, with interest payable annually $1.5-million, six-year, 10% note, dated December 31, 2020, with interest payable annually The March 1, 2024 expenditure included land costs of $156,000. Interest revenue earned in 2024 on the unused idle construction loan amounted to $54,000. Prepare the journal entry to record the capitalization of borrowing costs and the recognition of interest expense, if any, at December 31, 2024. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter O for the amounts. List all debit entries before credit entries. Do not round intermediate calculations. Round capitalization rate to 2 decimal places, e.g. 52.75% and final answers to O decimal places, e.g. 5,275.) Account Titles and Explanation Buildings-Structure Interest Expense Buildings-Roof Buildings-HVAC Cash Debit Credit 1000
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Dhapa Rakes
Transcribed Image Text:On December 31, 2023, Novak Inc., a public company, borrowed $3 million at 10% payable annually to finance the construction of a
new building. In 2024, the company made the following expenditures related to this building structure: March 1, $516,000; June 1,
$612,000; July 1, $1.5 million (of which $390,000 was for the roof); December 1, $1.5 million (of which $738,000 was for the building
HVAC).
Additional information follows:
1.
2.
3.
Other debt outstanding:
$3-million, 10-year, 12% bond, dated December 31, 2016, with interest payable annually
$1.5-million, six-year, 10% note, dated December 31, 2020, with interest payable annually
The March 1, 2024 expenditure included land costs of $156,000.
Interest revenue earned in 2024 on the unused idle construction loan amounted to $54,000.
Prepare the journal entry to record the capitalization of borrowing costs and the recognition of interest expense, if any, at
December 31, 2024. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is
required, select "No Entry" for the account titles and enter O for the amounts. List all debit entries before credit entries. Do not round
intermediate calculations. Round capitalization rate to 2 decimal places, e.g. 52.75% and final answers to O decimal places, e.g. 5,275.)
Account Titles and Explanation
Buildings-Structure
Interest Expense
Buildings-Roof
Buildings-HVAC
Cash
Debit
Credit
1000
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