Question
n January 1, 2024, the Mason Manufacturing Company began construction of a building to be used as its office headquarters. The building was completed on
n 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 | $ 1,200,000 |
|---|---|
| March 1, 2024 | 900,000 |
| June 30, 2024 | 1,100,000 |
| October 1, 2024 | 900,000 |
| January 31, 2025 | 315,000 |
| April 30, 2025 | 648,000 |
| August 31, 2025 | 945,000 |
On January 1, 2024, the company obtained a $3,500,000 construction loan with a 12% interest rate. The loan was outstanding all of 2024 and 2025. The companys other interest-bearing debt included two long-term notes of $3,000,000 and $7,000,000 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:
- Calculate the amount of interest that Mason should capitalize in 2024 and 2025 using the specific interest method.
- What is the total cost of the building?
- Calculate the amount of interest expense that will appear in the 2024 and 2025 income statements.
PLEASE HELP AND EXPLAIN. LAST PERSON DID NOT GET THIS RIGHT
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Financial Accounting
Authors: Paul D. Kimmel, Jerry J. Weygandt, Donald E. Kieso
3rd Edition
0471372668, 978-0471372660
