Question
On January 1, 2013, the Mason Manufacturing Company began construction of a building to be used as its office headquarters. The building was completed on
On January 1, 2013, the Mason Manufacturing Company began construction of a building to be used as its office headquarters. The building was completed on September 30, 2014. Expenditures on the project were as follows:
January 1, 2013 | $ | 1,330,000 | |
March 1, 2013 | 780,000 | ||
June 30, 2013 | 230,000 | ||
October 1, 2013 | 660,000 | ||
January 31, 2014 | 540,000 | ||
April 30, 2014 | 855,000 | ||
August 31, 2014 | 1,440,000 | ||
On January 1, 2013, the company obtained a $3 million construction loan with a 12% interest rate. The loan was outstanding all of 2013 and 2014. The companys other interest-bearing debt included two long-term notes of $4,600,000 and $6,600,000 with interest rates of 6% and 8%, respectively. Both notes were outstanding during all of 2013 and 2014. Interest is paid annually on all debt. The companys fiscal year-end is December 31. |
Required: |
1. | Calculate the amount of interest that Mason should capitalize in 2013 and 2014 using the weighted-average method. (Round interest rate to 2 decimal places. Enter your answers in whole dollars.) | ||||||
|
2. | What is the total cost of the building? (Round interest rate to 2 decimal places. Enter your answers in whole dollars.)
| |||||||||
3. Calculate the amount of interest expense that will appear in the 2013 and 2014 income statements. (Round interest rate to 2 decimal places. Enter your answers in whole dollars.)
|
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started