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a. The storage building was self-constructed this year by Accounting Creations. The Company had their initial expenditure of $500,000 on January 1. They paid an additional $375,000 on May 1st, $250,000 on August 1st, and then the final payment of $150,000 on December 1st when the building was completed and occupancy occurred. The company has decided to use S/L method for depreciation. The storage building is estimated to have a life of 40 years and a salvage value of $78,000. The company depreciates using partial years (Hint: (1) only consider depreciation expense after the completion of the construction; (2) use the avoidable interest computed from i).
b. Accounting Creations Double Entry has two loans outstanding as of 12/31/2018. Interest is paid annually on January 1st. The facts on each loan are as follows: Onstar Bank Loan – outstanding since January 1, 2018 with a 4.0% interest rate. This loan was taken out to finance the construction of the Storage Building. Interest for the year and 10% of the principle will be paid to the bank on January 1, 2019. Except for recording the initial cash received and loan, no additional entries have been made. Coldstar Bank Loan – also outstanding all of 2018 with 3.06% interest rate. Interest is due on January 1, 2019. Principle is due on January 1, 2024. Since interest will not be paid to the Bank until 2019, Accounting Creations’ office staff did not accrue any interest.
Please please help me with the journal entry for b.