During 2015 and 2016, Marvel Company built a building to house inventory. The expenditures on the construction project were as follows:
Ground was broken on this project with the ceremonial first shovel of dirt by the town major on 11/1/14. On 10/1/14 Marvel made a $62,000 payment to the architectural firm.
Marvel moved into the building on 7/31/16, the day the building was completed.
Marvel obtained a 9-year line of credit construction loan for this project was secured from its bank for $2,800,000 on 2/1/15. This loan had an 6.84% annual interest rate and interest only is paid every December 31st with the $2,800,000 principal paid equally each December 31st until the loan is paid off. In addition to the principal payments,all interest owed is also paid each December 31st.
Marvel has other debt outstanding consisting of a $3,700,000 bond bearing 8.64% interest of which 22% of the bond was paid off on 8/31/15. The bond was issued on 8/31/10 and called for interest oly to be paid annually each July 31st. The maturity date of the bond is 8/31/24. The market rate of interest on 8/31/10 was 8.64%.
Marvel also has a $3,740,000 note payable bearing a 3.66% interest rate that was created on 11/30/13 when the market rate of interest was 5.36%. The note calls for interest only payments throughout the life of the loan and is due on 11/30/26. Interest is paid annually each September 30th and was paid according to schedule during 2015 and 2016.(when finding the weighted average interest rate of the “general debt”, use the market interest rate rather than the stated).
Incorporated into the 3/1/15 payment was the purchase of land ready for its intended use to put a building. The allocated price of the land was $282,000 and is paid from the line of credit loan established on 2/1/15. Also 35% of the payment made to the architectural firm is allocated to the land and the rest to the building.
The building was assigned a useful life of 32 years and a salvage value of 6% of historical cost. Marvel Company decided that 150% declining balance would be the best depreciation method to use.
Required: prepare all journal entries related to this construction project and debt outstanding from 10/1/14 through 12/31/16 (Spreadsheets as must accompany as support for the journal entries).