On January 1, 2016, the Mason Manufacturing Company beganconstruction of a building to be used as its office headquarters.The building was completed on September 30, 2017. Expenditures onthe project were as follows: January 1, 2016 $ 1,310,000 March 1,2016 1,020,000 June 30, 2016 1,220,000 October 1, 2016 1,020,000January 31, 2017 333,000 April 30, 2017 666,000 August 31, 2017963,000 On January 1, 2016, the company obtained a $3,700,000construction loan with a 12% interest rate. The loan wasoutstanding all of 2016 and 2017. The companyâs otherinterest-bearing debt included two long-term notes of $3,000,000and $7,000,000 with interest rates of 8% and 10%, respectively.Both notes were outstanding during all of 2016 and 2017. Interestis paid annually on all debt. The companyâs fiscal year-end isDecember 31. Required: 1.
Calculate the amount of interest that Mason should capitalize in2016 and 2017 using the specific interest method.
Interest capitalized 2016 2017
2. What is the total cost of the building? Total cost ofbuilding
3. Calculate the amount of interest expense that will appear inthe 2016 and 2017 income statements.
Interest expense 2016 2017
On January 1, 2016, the Mason Manufacturing Company beganconstruction of a building to be used as its office headquarters.The building was completed on September 30, 2017. Expenditures onthe project were as follows: January 1, 2016 $ 1,310,000 March 1,2016 1,020,000 June 30, 2016 1,220,000 October 1, 2016 1,020,000January 31, 2017 333,000 April 30, 2017 666,000 August 31, 2017963,000 On January 1, 2016, the company obtained a $3,700,000construction loan with a 12% interest rate. The loan wasoutstanding all of 2016 and 2017. The companyâs otherinterest-bearing debt included two long-term notes of $3,000,000and $7,000,000 with interest rates of 8% and 10%, respectively.Both notes were outstanding during all of 2016 and 2017. Interestis paid annually on all debt. The companyâs fiscal year-end isDecember 31. Required: 1.
Calculate the amount of interest that Mason should capitalize in2016 and 2017 using the specific interest method.
Interest capitalized 2016 2017
2. What is the total cost of the building? Total cost ofbuilding
3. Calculate the amount of interest expense that will appear inthe 2016 and 2017 income statements.
Interest expense 2016 2017
Related questions
On January 1, 2016, the Mason Manufacturing Company beganconstruction of a building to be used as its office headquarters.The building was completed on September 30, 2017. |
| Expenditures on theproject were as follows: |
| January 1, 2016 | $ | 1,090,000 | |
| March 1, 2016 | 780,000 | ||
| June 30, 2016 | 980,000 | ||
| October 1, 2016 | 780,000 | ||
| January 31,2017 | 297,000 | ||
| April 30, 2017 | 630,000 | ||
| August 31, 2017 | 927,000 | ||
On January 1, 2016, the company obtained a $3,300,000construction loan with a 16% interest rate. The loan wasoutstanding all of 2016 and 2017. The companyâs otherinterest-bearing debt included two long-term notes of $2,000,000and $8,000,000 with interest rates of 10% and 12%, respectively.Both notes were outstanding during all of 2016 and 2017. Interestis paid annually on all debt. The companyâs fiscal year-end isDecember 31. |
| Required: |
| 1. | Calculate the amount of interest that Mason should capitalize in2016 and 2017 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 the2016 and 2017 income statements. |
| On January 1, 2016, the Mason Manufacturing Company began construction of a building to be used as its office headquarters. The building was completed on September 30, 2017. |
| Expenditures on the project were as follows: |
| January 1, 2016 | $ | 1,230,000 | |
| March 1, 2016 | 720,000 | ||
| June 30, 2016 | 380,000 | ||
| October 1, 2016 | 670,000 | ||
| January 31, 2017 | 990,000 | ||
| April 30, 2017 | 1,305,000 | ||
| August 31, 2017 | 2,340,000 | ||
| On January 1, 2016, the company obtained a $3 million construction loan with a 12% interest rate. The loan was outstanding all of 2016 and 2017. The companyâs 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 2016 and 2017. Interest is paid annually on all debt. The companyâs fiscal year-end is December 31. Assume the $3 million loan is not specifically tied to construction of the building. |
| Required: |
| 1. | Calculate the amount of interest that Mason should capitalize in 2016 and 2017 using the weighted-average method. (Do not round intermediate calculations. Round your answers to the nearest whole dollars.) |
| 2. | What is the total cost of the building? (Do not round intermediate calculations. Round your answer to the nearest whole dollar.) |
| 3. | Calculate the amount of interest expense that will appear in the 2016 and 2017 income statements. (Do not round intermediate calculations. Round your answers to the nearest whole dollars.) |
| On January 1, 2016, the Mason Manufacturing Company began construction of a building to be used as its office headquarters. The building was completed on September 30, 2017. |
| Expenditures on the project were as follows: |
| January 1, 2016 | $ | 1,360,000 | |
| March 1, 2016 | 810,000 | ||
| June 30, 2016 | 160,000 | ||
| October 1, 2016 | 670,000 | ||
| January 31, 2017 | 585,000 | ||
| April 30, 2017 | 900,000 | ||
| August 31, 2017 | 1,530,000 | ||
| On January 1, 2016, the company obtained a $3 million construction loan with a 10% interest rate. The loan was outstanding all of 2016 and 2017. The companyâs other interest-bearing debt included two long-term notes of $4,700,000 and $6,700,000 with interest rates of 7% and 9%, respectively. Both notes were outstanding during all of 2016 and 2017. Interest is paid annually on all debt. The companyâs fiscal year-end is December 31. Assume the $3 million loan is not specifically tied to construction of the building. |
| Required: |
| 1. | Calculate the amount of interest that Mason should capitalize in 2016 and 2017 using the weighted-average method. (Do not round intermediate calculations. Round your answers to the nearest whole dollars.) |
| 2. | What is the total cost of the building? (Do not round intermediate calculations. Round your answer to the nearest whole dollar.) |
| 3. | Calculate the amount of interest expense that will appear in the 2016 and 2017 income statements. (Do not round intermediate calculations. Round your answers to the nearest whole dollars.) |
