Foothills Power Company begins a 2-year construction project on a power plant on January 1, 2019. The following information is available:
• The company borrows $10 million on January 1, 2019, at 12%, specifically for use on the project.
• The company’s other borrowings are:
°° $20 million at 10%
°° $60 million at 8%
• The expenditures for the project, incurred evenly each year (excluding capitalized interest from previous years),
are as follows:
°° $6,000,000 in 2019
°° $11,460,000 in 2020
°° $1,800,000 in 2021
• The project is completed on March 31, 2021. It took longer than originally planned because the company suspended construction for the last 3 months of 2019 because of a concern about the salability of the electricity produced by the plant.
• Because of reduced demand for electricity, the plant does not begin operations until October 1, 2021.
• The company invests at 11% the unused amounts of the $10 million borrowed specifically for the project.
• Assume all transactions are in cash unless otherwise indicated.
Required:
1. Prepare all the necessary journal entries for each of the 3 years. Record all construction costs in a Construction in Progress inventory account.
2. How would your answer change if Foothills used IFRS?
