Question
On January 1, 2021, the company obtained a $3 million loan with a 11% interest rate. The building was completed on September 30, 2022. Expenditures
On January 1, 2021, the company obtained a $3 million loan with a 11% interest rate. The building was completed on September 30, 2022. Expenditures on the project were as follows:
January 1, 2021 | $ | 1,110,000 | |
March 1, 2021 | 930,000 | ||
June 30, 2021 | 250,000 | ||
October 1, 2021 | 710,000 | ||
January 31, 2022 | 765,000 | ||
April 30, 2022 | 1,080,000 | ||
August 31, 2022 | 1,890,000 | ||
On January 1, 2021, the company obtained a $3 million construction loan with a 11% interest rate. Assume the $3 million loan is not specifically tied to construction of the building. The loan was outstanding all of 2021 and 2022. The companys other interest-bearing debt included two long-term notes of $5,100,000 and $7,100,000 with interest rates of 7% and 9%, respectively. Both notes were outstanding during all of 2021 and 2022. 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 2021 and 2022 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 2021 and 2022 income statements.
1 & 3. Calculate the amount of interest that Mason should capitalize in 2021 and 2022 using the weighted-average method and interest expense that will appear in the 2021 and 2022 income statements. ("Round "Weighted-average rate of all debt" to 2 decimal places but do not round other intermediate calculations. Round your answers to the nearest whole dollar.
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2. What is the total cost of the building? ("Round "Weighted-average rate of all debt" to 2 decimal places but do not round other intermediate calculations. Round your answer to the nearest whole dollar.)
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