E10-8B (Capitalization of Interest) On December 31, 2013, Jumble Inc. borrowed $1,000,000 at 10% payable annually to finance the construction of a new building.

E10-8B (Capitalization of Interest) On December 31, 2013, Jumble Inc. borrowed $1,000,000 at 10% payable annually to finance the construction of a new building. In 2014, the company made the following expenditures related to this building: June 1, $400,000; July 1, $600,000; September 1, $1,200,000; December 1, $600,000. The building was completed in April 2015. Additional information is provided as follows.

1. Other debt outstanding

10-year, 8% bond, dated December 31, 2012, interest payable annually            $10,000,000

15-year, 10% note, dated December 31, 2009, interest payable annually             $2,500,000

2. Interest revenue earned in 2014                                                                                $6,000

Instructions

(a) Determine the amount of interest to be capitalized in 2014 in relation to the construction of the building.

(b) Prepare the journal entry to record the capitalization of interest and the recognition of interest expense, if any, at December 31, 2014.