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.