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 March 1, 2021 June 30, 2021 October 1, 2021 January 31, 2022 April 30, 2022 August 31, 2022 $2,020,000 1,740,000 1,940,000 1,740,000 441,000 774,000 1,071,000 www On January 1, 2021, the company obtained a $4,900,000 construction loan with a 12% 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 intere ates of 8% and 10%, 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: . Calculate the amount of interest that Mason should capitalize in 2021 and 2022 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 2021 and 2022 income statements.
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 March 1, 2021 June 30, 2021 October 1, 2021 January 31, 2022 April 30, 2022 August 31, 2022 $2,020,000 1,740,000 1,940,000 1,740,000 441,000 774,000 1,071,000 www On January 1, 2021, the company obtained a $4,900,000 construction loan with a 12% 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 intere ates of 8% and 10%, 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: . Calculate the amount of interest that Mason should capitalize in 2021 and 2022 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 2021 and 2022 income statements.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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![Problem 10-9 (Algo) Interest capitalization; specific interest method [LO10-7]
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
March 1, 2021
June 30, 2021
October 1, 2021
January 31, 2022
April 30, 2022
August 31, 2022
On January 1, 2021, the company obtained a $4,900,000 construction loan with a 12% 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 8% and 10%, 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.
$2,020,000
1,740,000
1,940,000
1,740,000
441,000
774,000
1,071,000
Required:
1. Calculate the amount of interest that Mason should capitalize in 2021 and 2022 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 2021 and 2022 income statements.
Complete this question by entering your answers in the tabs below.
Req 1 and 3
Req 2
What is the total cost of the building? (Do not round intermediate calculations.)
Total cost of building
< Req 1 and 3
Req 2 >](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fe313bcc6-6d96-4bea-a856-5c9788afe468%2F29fd88d5-05ea-45ca-bdc4-1cb67cc3ade4%2F7pqclor_processed.jpeg&w=3840&q=75)
Transcribed Image Text:Problem 10-9 (Algo) Interest capitalization; specific interest method [LO10-7]
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
March 1, 2021
June 30, 2021
October 1, 2021
January 31, 2022
April 30, 2022
August 31, 2022
On January 1, 2021, the company obtained a $4,900,000 construction loan with a 12% 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 8% and 10%, 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.
$2,020,000
1,740,000
1,940,000
1,740,000
441,000
774,000
1,071,000
Required:
1. Calculate the amount of interest that Mason should capitalize in 2021 and 2022 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 2021 and 2022 income statements.
Complete this question by entering your answers in the tabs below.
Req 1 and 3
Req 2
What is the total cost of the building? (Do not round intermediate calculations.)
Total cost of building
< Req 1 and 3
Req 2 >
![Problem 10-9 (Algo) Interest capitalization; specific interest method [LO10-7]
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
March 1, 2021
June 30, 2021
October 1, 2021
January 31, 2022
April 30, 2022
August 31, 2022
On January 1, 2021, the company obtained a $4,900,000 construction loan with a 12% 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 8% and 10%, 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.
$2,020,000
1,740,000
1,940,000
1,740,000
Required:
1. Calculate the amount of interest that Mason should capitalize in 2021 and 2022 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 2021 and 2022 income statements.
Req 1 and 3
441,000
774,000
1,071,000
Complete this question by entering your answers in the tabs below.
Req 2
Interest capitalized
Interest expense
Calculate the amount of interest that Mason should capitalize in 2021 and 2022 using the specific interest method and interest
expense that will appear in the 2021 and 2022 income statements. (Do not round intermediate calculations.)
2021
2022
< Req 1 and 3
Req 2 >](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fe313bcc6-6d96-4bea-a856-5c9788afe468%2F29fd88d5-05ea-45ca-bdc4-1cb67cc3ade4%2Ff4b31kr_processed.jpeg&w=3840&q=75)
Transcribed Image Text:Problem 10-9 (Algo) Interest capitalization; specific interest method [LO10-7]
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
March 1, 2021
June 30, 2021
October 1, 2021
January 31, 2022
April 30, 2022
August 31, 2022
On January 1, 2021, the company obtained a $4,900,000 construction loan with a 12% 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 8% and 10%, 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.
$2,020,000
1,740,000
1,940,000
1,740,000
Required:
1. Calculate the amount of interest that Mason should capitalize in 2021 and 2022 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 2021 and 2022 income statements.
Req 1 and 3
441,000
774,000
1,071,000
Complete this question by entering your answers in the tabs below.
Req 2
Interest capitalized
Interest expense
Calculate the amount of interest that Mason should capitalize in 2021 and 2022 using the specific interest method and interest
expense that will appear in the 2021 and 2022 income statements. (Do not round intermediate calculations.)
2021
2022
< Req 1 and 3
Req 2 >
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