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After careful planning, ABC Ltd appointed XYZ Ltd to build the company's head office in Depok. Both parties agreed to the construction contract on August 31, 2014. Construction work started on January 1, 2015, and the building is estimated to be ready for use in 2 years. Throughout 2015, ABC Ltd made payments for construction work to XYZ Ltd as follows: Jan 31: Rp240,000 Mar 1 : Rp300,000 Jul 31 : Rp150,000 Sep 28 : Rp175,000 Dec 31 : Rp100,000 Total : Rp975,000

Half the payment from the initial payment is used to purchase the land that will be the location of the building. In addition, ABC Ltd has notes payable and bonds payable as of December 31, 2015, as follows: Main Items 1. 12%, 4-year tenor note payable, issued December 31, 2014, intended to finance the purchase of land and initial construction payments, interest payable every December 31 Rp500,000 2. 7%, 3-year note payable, issued on December 31, 2013, interest payable every December 31. Rp500,000 3. 10%, 5-year tenor bonds issued on December 31, 2012, interest payable every December 31 Rp400,000

Requested: 1. Is it allowed to capitalize on the loan interest? 2. Determine the amount of interest that can be capitalized throughout 2015. 3. Prepare journal entries related to interest capitalization throughout 2015. 4. Show the required disclosures related to the capitalization of interest and expenses recorded in the income statement!

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