Calculate the amount of interest expense that will appear

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Reference no: EM13572381

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	$	1,230,000
March 1, 2013		720,000
June 30, 2013		380,000
October 1, 2013		670,000
January 31, 2014		990,000
April 30, 2014		1,305,000
August 31, 2014		2,340,000

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 company's other interest-bearing debt included two long-term notes of $5,600,000 and $7,600,000 with interest rates of 8% and 10%, respectively. Both notes were outstanding during all of 2013 and 2014. Interest is paid annually on all debt. The company's fiscal year-end is December 31.

Required:

Calculate the amount of interest that Mason should capitalize in 2013 and 2014 using the weighted-average method. (Do not round intermediate calculations. Round the weighted average rate to 4 decimal places (e.g. 0.54321 to 54.32%). Enter your answers in dollars not in millions. Round your answers to the nearest dollar amount.)

	2013	2014
Interest capitalized	$	$

2.	What is the total cost of the building? (Do not round intermediate calculations. Round the weighted average rate to 4 decimal places (e.g. 0.54321 to 54.32%). Enter your answer in dollars not in millions. Round your answer to the nearest dollar amount.)

Total cost of building

Calculate the amount of interest expense that will appear in the 2013 and 2014 income statements. (Do not round intermediate calculations. Round the weighted average rate to 4 decimal places (e.g. 0.54321 to 54.32%). Enter your answers in dollars not in millions. Round your answers to the nearest dollar amount.)

	2013	2014
Interest expense	$	$

Reference no: EM13572381

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