On January 1, 2024, the Mason Manufacturing Company began construction of a building to be used as its office headquarters. The building was completed on September 30, 2025. Expenditures on the project were as follows: January 1, 2024 $ 1,040,000 March 1, 2024 810,000 June 30, 2024 450,000 October 1, 2024 700,000 January 31, 2025 1,125,000 April 30, 2025 1,440,000 August 31, 2025 2,610,000 On January 1, 2024, the company obtained a $3 million construction loan with a 10% interest rate. Assume the $3 million loan is not specifically tied to construction of the building. The loan was outstanding all of 2024 and 2025. 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 2024 and 2025. Interest is paid annually on all debt. The company’s fiscal year-end is December 31. Required: Using the WEIGHTED-AVERAGE INTEREST METHOD, answer the following questions: 1. Calculate the amount of interest that Mason should capitalize in 2024 and 2025 using the weighted-average method. 2. Calculate the amount of interest expense that will appear in the 2024 and 2025 income statements. 3. What is the total cost of the building? DO NOT GIVE SOLUTION IN IMAGE FORMAT
On January 1, 2024, the Mason Manufacturing Company began construction of a building to be used as its office headquarters. The building was completed on September 30, 2025. Expenditures on the project were as follows:
January 1, 2024 $ 1,040,000
March 1, 2024 810,000
June 30, 2024 450,000
October 1, 2024 700,000
January 31, 2025 1,125,000
April 30, 2025 1,440,000
August 31, 2025 2,610,000
On January 1, 2024, the company obtained a $3 million construction loan with a 10% interest rate. Assume the $3 million loan is not specifically tied to construction of the building. The loan was outstanding all of 2024 and 2025. 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 2024 and 2025. Interest is paid annually on all debt. The company’s fiscal year-end is December 31.
Required:
Using the WEIGHTED-AVERAGE INTEREST METHOD, answer the following questions:
1. Calculate the amount of interest that Mason should capitalize in 2024 and 2025 using the weighted-average method.
2. Calculate the amount of interest expense that will appear in the 2024 and 2025 income statements.
3. What is the total cost of the building?
DO NOT GIVE SOLUTION IN IMAGE FORMAT
Trending now
This is a popular solution!
Step by step
Solved in 3 steps with 4 images
