Question
I tried doing all three questions on my own but got them all wrong, I'd appreciate all the help I can get with this, thank
I tried doing all three questions on my own but got them all wrong, I'd appreciate all the help I can get with this, thank you!
On January 1, 2024, the Mason Manufacturing Company began construction of a building to be used as its office headquarters. The building was completed on September 30, 2025. Expenditures on the project were as follows:
January 1, 2024 | $ 1,230,000 |
---|---|
March 1, 2024 | 720,000 |
June 30, 2024 | 380,000 |
October 1, 2024 | 670,000 |
January 31, 2025 | 990,000 |
April 30, 2025 | 1,305,000 |
August 31, 2025 | 2,340,000 |
On January 1, 2024, the company obtained a $3 million construction loan with a 12% interest rate. Assume the $3 million loan is not specifically tied to construction of the building. The loan was outstanding all of 2024 and 2025. The companys other interest-bearing debt included two long-term notes of $5,600,000 and $7,600,000 with interest rates of 8% and 10%, respectively. Both notes were outstanding during all of 2024 and 2025. Interest is paid annually on all debt. The companys fiscal year-end is December 31.
Required:
Using the weighted-average interest method, answer the following questions:
1. Calculate the amount of interest that Mason should capitalize in 2024 and 2025 using the weighted-average method.
2. What is the total cost of the building?
3. Calculate the amount of interest expense that will appear in the 2024 and 2025 income statements.
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