Problem
Thornton Industries began construction of a warehouse on July 1, 2016. The project was completed on March 31, 2017. No new loans were required to fund construction. Thornton does have the following two interest-bearing liabilities that were outstanding throughout the construction period:
$2,000,000, 8% note
$8,000,000, 4% bonds
Construction expenditures incurred were as follows:
January 1, 2016 $ 400,000
September 30, 2016 600,000
November 30, 2016 600,000
January 30, 2017 540,000
The company's fiscal year-end is December 31.
Required:
Prepare the journal entries to record the following:
1. Cost of the warehouse for 2016
2. Interest capitalization adn the recognition of interest expense for 2016
3. Cost of the warehouse for 2017
4. Interest capitalization and the recognition of interst expense for 2017.