Question :
Cranston LTD. prepares its financial statements related to International Financial Reporting Standards. In October 2013, the company received a $2 million government grant. The grant represents 20 percent of the total cost of equipment that can be used to improve the roads in the local area. Cranston recorded the grant and the purchase of the equipment as given:
Cash 2,000,000
Revenue 2,000,000
Equipment 10,000,000
Cash 10,000,000
Required:
2. Prepare the two alternative correcting entries.
On January 1, 2013, the Marjlee Company starts construction of an office building to be used as its corporate headquarters. The building was finished early in 2014. Construction expenditures for 2013, which were incurred consistently throughout the year, totaled $4,500,000. Marjlee had the subsequent debt obligations which were outstanding during all of 2013:
Construction loan, 9% $1,550,000
Long-term note, 8% 2,250,000
Long-term note, 4% 2,250,000
________________________________________
Required:
Determine the amount of interest capitalized in 2013 for the building using the definite interest method.