King Company Began Constructing a Building for Its Own Use

question 12

Essay

King Company began constructing a building for its own use in January 2015.During 2015,King incurred interest of $60,000 on specific construction debt and $12,000 on other borrowings.Interest computed on the weighted-average amount of accumulated expenditures for the building during 2015 as $50,000.
Required:
a.What amount of interest should King capitalize?
b.Prepare the journal entry to record payment of the interest.

---

Definitions:

Ending Inventory

The total value of all unsold goods that a company has in its possession at the end of an accounting period.

Periodic Inventory

An inventory accounting system where inventory levels and cost of goods sold are determined at the end of an accounting period.

Perpetual Inventory System

An accounting approach to continuously track inventory levels, purchases, and sales, updating the inventory records in real-time.

Ending Inventory

The value of goods available for sale at the end of an accounting period, calculated using either a periodic or perpetual inventory system.