In: Accounting
On January 1, 2021, the Mason Manufacturing Company began
construction of a building to be used as its office headquarters.
The building was completed on September 30, 2022. Expenditures on
the project were as follows:
January 1, 2021 | $ | 1,090,000 | |
March 1, 2021 | 780,000 | ||
June 30, 2021 | 980,000 | ||
October 1, 2021 | 780,000 | ||
January 31, 2022 | 297,000 | ||
April 30, 2022 | 630,000 | ||
August 31, 2022 | 927,000 | ||
On January 1, 2021, the company obtained a $3,300,000 construction
loan with a 16% interest rate. The loan was outstanding all of 2021
and 2022. The company’s other interest-bearing debt included two
long-term notes of $2,000,000 and $8,000,000 with interest rates of
10% and 12%, respectively. Both notes were outstanding during all
of 2021 and 2022. Interest is paid annually on all debt. The
company’s fiscal year-end is December 31.
What I need solved:
1. Please help me calculate the amount of interest
that Mason should capitalize in 2021 and 2022 using the specific
interest method.
2. Help me find the total cost of the
building?
3. Calculate the amount of interest expense that
will appear in the 2021 and 2022 income statements.