Interest Capitalization Interest is being capitalized on an on-going project that was begu
Interest Capitalization Interest is being capitalized on an on-going project that was begun by the company in 2015. The details of construction are as follows: Total expenditures from 2015: $10, 372,000 Total interest capitalized from 2015: $368,000 Construction will conclude on September 1, 2016. The following additional expenditures are scheduled during 2016: February 1, $3, 300,000 May 1, $2, 730,000 August 31, $1, 900,000.
The company has a five-year $7,000,000 bond representing funds borrowed explicitly to fund construction at a 3% rate. The company also has $10,000,000 bonds outstanding, representing a $8,000,000 issue at a 5% rate and a $2,000,000 issue at a 4% rate. Determine interest that qualifies for capitalization, interest expense recorded on the income statement and the balance of the construction asset for 2016.
Software Research and Development The following expenses were recorded during the year on a software development project. It had been determined that the project reached technological feasibility on May 1, 2016 and is scheduled for release on November 1 of the year. $3,000,000 of salary paid to employs on the development project equitably throughout the year. $200,000 charge to a third-party consultation at the end of each month of the year. $750,000 of lab equipment purchased on January 1, 2016.
The equipment has a useful life of 5 years with no salvage and is determined to be useful in other projects for the firm. $450,000 expenditure related to product masters and coding during August. $ 100,000 enhancement to the product on December 1 that increases the overall service quality of the software. Classify and record the amounts of each of the following transactions. You may list separate journal entries for each, but aggregate them into a single entry after completing each individual entry.