During Year 4 ATTN hired a construction company to build a new office building. The construction project was started at the beginning of March and was substantially finished by the end of the year. In fact, the company was able to begin moving furniture into the new office on December 30, Year 4. The company carefully followed U.S. GAAP procedures to capitalize the avoidable interest on the building. After construction, ATTN decided that the building had no salvage value and would last for 15 years.With a possible transition from U.S. GAAP to IFRS looming, ATTN’s management team feels that this is the perfect opportunity to see what the change in GAAP will do to their financial statements. They have asked the acounting team to recalculate the capitalized interest (and any transactions based on that capitalization) following IFRS principles. Using the infomation below, determine the journal entry that would be necessary if ATTN were to switch from the U.S. GAAP method of capitalizing interest to the IFRS method at the end of Year 5.NOTE: While I want you to update the FSs for this adjustment, it would not affect taxes since it is only a ‘what if’ entry.Payments to the construction company Date Amount3/1 $253,6427/1 $46,1179/1 $92,23410/15 $69,175$461,168Outstanding debt, Year 4 Principal Interest RateLoans Payable $606,800 5.00%Notes Payable $922,336 2.50%Construction Note Payable $230,584 4.00%
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