Calculate the amount of interest expense that will appear

Reference no: EM13575186

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	$	1,040,000
March 1, 2013		810,000
June 30, 2013		450,000
October 1, 2013		700,000
January 31, 2014		1,125,000
April 30, 2014		1,440,000
August 31, 2014		2,610,000

On January 1, 2013, the company obtained a $3 million construction loan with a 10% interest rate. The loan was outstanding all of 2013 and 2014. The company's other interest-bearing debt included two long-term notes of $5,900,000 and $7,900,000 with interest rates of 7% and 9%, 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:

1.	Calculate the amount of interest that Mason should capitalize in 2013 and 2014 using the weighted-average method. (Do not round your intermediate calculations. Enter your answers in whole dollars.)

2.	What is the total cost of the building? (Do not round your intermediate calculations. Enter your answers in whole dollars.)

3.	Calculate the amount of interest expense that will appear in the 2013 and 2014 income statements. (Do not round your intermediate calculations. Enter your answers in whole dollars.)

Reference no: EM13575186

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