Question
Problem 07: Interest Capitalization [Uneven] On January 1, 2021, the Mason Manufacturing Company began construction of a building to be used as its office headquarters.
Problem 07: Interest Capitalization [Uneven] On January 1, 2021, the Mason Manufacturing Company began construction of a building to be used as its office headquarters. The building was completed on September 30, 2022. Expenditures on the project were as follows: February 1, 2021 $ 2,050,000 March 1, 2021 1,800,000 June 30, 2021 2,000,000 October 1, 2021 1,800,000 January 31, 2022 450,000 April 30, 2022 783,000 August 31, 2022 1,080,000 On January 1, 2021, the company obtained a $5,000,000 construction loan with a 9% interest rate. The loan was outstanding all of 2021 and 2022. The companys other interest-bearing debt included two long-term notes of $6,000,000 and $9,000,000 with interest rates of 5% and 8%, 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 specific interest 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.
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