Summary Entries for Interest Payments
Santa Clarita Company reported interest expense in 2008 and 2007 of $470,000 and $410,000, respectively. The balance in Accrued Interest Payable at the end of 2008, 2007, and 2006 was $51,000, $59,000, and $46,000, respectively. In addition, a note to Santa Clarita’s 2008 financial statements included the following: Interest costs related to construction in progress are capitalized as incurred. The Company capitalized $350,000 and $260,000 of interest costs during the years 2008 and 2007, respectively.
Instructions:
1. What summary journal entries would be needed to record all information related to interest in 2008 and 2007?
2. How would interest paid be disclosed in Santa Clarita’s statement of cash flows for 2008 and 2007? Santa Clarita uses the indirect method in reporting cash flow from operating activities.