Cranston LTD. prepares its financial statements according to International Financial Reporting Standards. In October 2013, the company received a $2 million government grant. The grant represents 20%

Cranston LTD. prepares its financial statements according to International Financial Reporting Standards. In October 2013, the company received a $2 million government grant. The grant represents 20% of the total cost of equipment that will be used to improve the roads in the local area. Cranston recorded the grant and the purchase of the equipment as follows:

Cash 2,000,000

Revenue 2,000,000

Equipment 10,000,000

Cash 10,000,000

________________________________________

Required:

2. Prepare the two alternative correcting entries. (Enter your answers in whole dollars. If no entry is required for a transaction, select “No journal entry required” in the first account field.)

On January 1, 2013, the Marjlee Company began construction of an office building to be used as its corporate headquarters. The building was completed early in 2014. Construction expenditures for 2013, which were incurred evenly throughout the year, totaled $4,500,000. Marjlee had the following 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:

Calculate the amount of interest capitalized in 2013 for the building using the specific interest method.

Leave a Comment