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 March 1, 2024 June 30, 2024 October 1, 2024 January 31, 2025 April 30, 2025 August 31, 2025 $1,000,000 600,000 800,000 600,000 270,000 585,000 900,000 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-beari debt included two long-term notes of $4,000,000 and $6,000,000 with interest rates of 6% and 8%, 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. What is the total cost of the building? 3. Calculate the amount of interest expense that will appear in the 2024 and 2025 income statements.
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 March 1, 2024 June 30, 2024 October 1, 2024 January 31, 2025 April 30, 2025 August 31, 2025 $1,000,000 600,000 800,000 600,000 270,000 585,000 900,000 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-beari debt included two long-term notes of $4,000,000 and $6,000,000 with interest rates of 6% and 8%, 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. What is the total cost of the building? 3. Calculate the amount of interest expense that will appear in the 2024 and 2025 income statements.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text: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
32
March 1, 2024
June 30, 2024
October 1, 2024
January 31, 2025
April 30, 2025
August 31, 2025
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 $4,000,000 and $6,000,000 with interest rates of 6% and 8%, 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:
$ 1,000,000
600,000
800,000
600,000
270,000
585,000
900,000
1. Calculate the amount of interest that Mason should capitalize in 2024 and 2025 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 2024 and 2025 income statements.
Complete this question by entering your answers in the tabs below.
Req 1 and 3
Req 2
1. Calculate the amount of interest that Mason should capitalize in 2024 and 2025 using the weighted-average method.
3. Calculate the amount of interest expense that will appear in the 2024 and 2025 income statements.
Note: Round "Weighted-average rate of all debt" to 2 decimal places and do not round other intermediate calculations. Enter
your answers in dollars rounded to the nearest whole number.
1. Interest capitalized $
3. Interest expense
2024
205,000
2025
< Req 1 and 3
Req 2 >
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