On December 31, 2009, Husrton Inc. borrowed $3,000,000 at 12%payable annually to finance the construction of a new building. In2010, the company made the following expenditures to this building:
March 1, 360,000, June 1, 600,000, July 1, $1,500,000, December1, 1,200,000. Additional information is provided as follows:
1-other debt outstanding
10-year, 11% bond, December 31, 2003, interest payable annually$4,000,000
6-year, 10% note, dated December 31, 2007, interest payableannually $1,600,000
2-March 1, 2010 expenditure included land costs of $150,000
3-Interest revenue earned in 2010 $49,000
a) determine the amount of interest to be capitalized in 2010 inrelation to the construction of the building.
b) prepare the journal entry to record the capitalization of interest and the recognition of the interest expense, if any at December 31, 2010.