FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN: 9781259964947
Author: Libby
Publisher: MCG
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On January 1, 2021, the company obtained a $3 million loan with a 11% interest rate. The building was completed on September 30,
2022. Expenditures on the project were as follows:
January 1, 2021
March 1, 2021
$1,200,000
660,000
520,000
620,000
360,000
675,000
1,080,000
June 30, 2021
October 1, 2021
January 31, 2022
April 30, 2022
August 31, 2022
On January 1, 2021, the company obtained a $3 million construction loan with a 11% interest rate. Assume the $3 million loan is not
specifically tied to construction of the building. The loan was outstanding all of 2021 and 2022. The company's other interest-bearing
debt included two long-term notes of $4,200,000 and $6.200,000 with interest rates of 6% and 8%, 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.
Required:
1. Calculate the amount of interest that Mason should capitalize in 2021 and 2022 using the weighted-average method.
2. What is the total cost of the building?
3. Calculate the amount of interest expense that will appear in the 2021 and 2022 income statements.
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Transcribed Image Text:On January 1, 2021, the company obtained a $3 million loan with a 11% interest rate. The building was completed on September 30, 2022. Expenditures on the project were as follows: January 1, 2021 March 1, 2021 $1,200,000 660,000 520,000 620,000 360,000 675,000 1,080,000 June 30, 2021 October 1, 2021 January 31, 2022 April 30, 2022 August 31, 2022 On January 1, 2021, the company obtained a $3 million construction loan with a 11% interest rate. Assume the $3 million loan is not specifically tied to construction of the building. The loan was outstanding all of 2021 and 2022. The company's other interest-bearing debt included two long-term notes of $4,200,000 and $6.200,000 with interest rates of 6% and 8%, 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. Required: 1. Calculate the amount of interest that Mason should capitalize in 2021 and 2022 using the weighted-average method. 2. What is the total cost of the building? 3. Calculate the amount of interest expense that will appear in the 2021 and 2022 income statements.
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