Question
On January 1, 2016, the Mason Manufacturing Company began construction of a building to be used as its office headquarters. The building was completed on
On January 1, 2016, the Mason Manufacturing Company began construction of a building to be used as its office headquarters. The building was completed on September 30, 2017. |
Expenditures on the project were as follows: |
January 1, 2016 | $ | 1,500,000 | |
March 1, 2016 | 1,200,000 | ||
June 30, 2016 | 1,400,000 | ||
October 1, 2016 | 1,200,000 | ||
January 31, 2017 | 360,000 | ||
April 30, 2017 | 693,000 | ||
August 31, 2017 | 990,000 | ||
On January 1, 2016, the company obtained a $4,000,000 construction loan with a 14% interest rate. The loan was outstanding all of 2016 and 2017. The companys other interest-bearing debt included two long-term notes of $1,000,000 and $4,000,000 with interest rates of 10% and 12%, respectively. Both notes were outstanding during all of 2016 and 2017. 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 2016 and 2017 using the specific interest method.
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