On January 1, 2024, the Mason Manufacturing Company began construction of a building to be used as its office headquarters. Th 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 $ 1,940,000 1,680,000 1,880,000 1,680,000 432,000 765,000 1,062,000 On January 1, 2024, the company obtained a $4,800,000 construction loan with a 14% interest rate. The loan was outstanding all 2024 and 2025. The company's other interest-bearing debt included two long-term notes of $3,000,000 and $7,000,000 with inte rates of 6% and 10%, respectively. Both notes were outstanding during all of 2024 and 2025. Interest is paid annually on all debt. company's fiscal year-end is December 31. Required: 1. Calculate the amount of interest that Mason should capitalize in 2024 and 2025 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 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. Th 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 $ 1,940,000 1,680,000 1,880,000 1,680,000 432,000 765,000 1,062,000 On January 1, 2024, the company obtained a $4,800,000 construction loan with a 14% interest rate. The loan was outstanding all 2024 and 2025. The company's other interest-bearing debt included two long-term notes of $3,000,000 and $7,000,000 with inte rates of 6% and 10%, respectively. Both notes were outstanding during all of 2024 and 2025. Interest is paid annually on all debt. company's fiscal year-end is December 31. Required: 1. Calculate the amount of interest that Mason should capitalize in 2024 and 2025 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 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
March 1, 2024
June 30, 2024
October 1, 2024
January 31, 2025
April 30, 2025
August 31, 2025
$ 1,940,000
1,680,000
1,880,000
1,680,000
432,000
765,000
1,062,000
On January 1, 2024, the company obtained a $4,800,000 construction loan with a 14% interest rate. The loan was outstanding all of
2024 and 2025. The company's other interest-bearing debt included two long-term notes of $3,000,000 and $7,000,000 with interest
rates of 6% and 10%, 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:
1. Calculate the amount of interest that Mason should capitalize in 2024 and 2025 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 the 2024 and 2025 income statements.
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