Reference no: EM13125074
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 $ 1,300,000
March 1, 2013 720,000
June 30, 2013 340,000
October 1, 2013 640,000
January 31, 2014 450,000
April 30, 2014 765,000
August 31, 2014 1,260,000
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 $4,400,000 and $6,400,000 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:
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.)
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: 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.)
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