Question
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
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 $ 1,000,000
March 1, 2024 600,000
June 30, 2024 800,000
October 1, 2024 600,000
January 31, 2025 270,000
April 30, 2025 585,000
August 31, 2025 900,000
On January 1, 2024, the company obtained a $3 million construction loan with a 10% interest rate. The loan was outstanding all of 2024 and 2025. The companys other interest-bearing debt included two long-term notes of $4,000,000 and $6,000,000 with interest rates of 6% and 8%, 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. Calculate the amount of interest expense that will appear in the 2024 and 2025 income statements. What is the total cost of the building?
Thank You!
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