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On January 1, 2021, the Mason Manufacturing Company began construction of a building to be used as its office headquarters. The bulding 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 $1,820,000 1,440,000 1,640,000 1,440,000 396,000 729,000 1,026,000 On January 1, 2021, the company obtained a $4,400,000 construction loan with a 14% 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. (Do not round intermediate calculations.) Required: 1. Calculate the amount of interest that Mason should capitalize in 2021 and 2022 using the specific interest method. Also, caloulate the amount of interest expense that will appear in the 2021 and 2022 income statements 2022 2021 Interest Capitalized Interest Expense 2. What is the total cost of the building?

On January 1, 2021, the Mason Manufacturing Company began construction of a building to be used as its office headquarters. The bulding 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 $1,820,000 1,440,000 1,640,000 1,440,000 396,000 729,000 1,026,000 On January 1, 2021, the company obtained a $4,400,000 construction loan with a 14% 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. (Do not round intermediate calculations.) Required: 1. Calculate the amount of interest that Mason should capitalize in 2021 and 2022 using the specific interest method. Also, caloulate the amount of interest expense that will appear in the 2021 and 2022 income statements 2022 2021 Interest Capitalized Interest Expense 2. What is the total cost of the building?

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
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On January 1, 2021, the Mason Manufacturing Company began construction of a building to be used as its office headquarters. The bulding 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 $1,820,000 1,440,000 1,640,000 1,440,000 396,000 729,000 1,026,000 On January 1, 2021, the company obtained a $4,400,000 construction loan with a 14% 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. (Do not round intermediate calculations.) Required: 1. Calculate the amount of interest that Mason should capitalize in 2021 and 2022 using the specific interest method. Also, calculate the amount of interest expense that will appear in the 2021 and 2022 income statements 2022 2021 Interest Capitalized Interest Expense 2. What is the total cost of the building?
Transcribed Image Text:On January 1, 2021, the Mason Manufacturing Company began construction of a building to be used as its office headquarters. The bulding 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 $1,820,000 1,440,000 1,640,000 1,440,000 396,000 729,000 1,026,000 On January 1, 2021, the company obtained a $4,400,000 construction loan with a 14% 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. (Do not round intermediate calculations.) Required: 1. Calculate the amount of interest that Mason should capitalize in 2021 and 2022 using the specific interest method. Also, calculate the amount of interest expense that will appear in the 2021 and 2022 income statements 2022 2021 Interest Capitalized Interest Expense 2. What is the total cost of the building?
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