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 $ 1,710,000 1,320,000 1,520,000 1,320,000 378,000 711,000 1,008,000 On January 1, 2024, the company obtained a $4,200,000 construction loan with a 16% interest rate. 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 12% and 14%, 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.
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 $ 1,710,000 1,320,000 1,520,000 1,320,000 378,000 711,000 1,008,000 On January 1, 2024, the company obtained a $4,200,000 construction loan with a 16% interest rate. 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 12% and 14%, 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.
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
On January 1, 2024, the company obtained a $4,200,000 construction loan with a 16% interest rate. 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 12% and 14%, 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.
$ 1,710,000
1,320,000
1,520,000
1,320,000
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.
Req 1 and 3
378,000
711,000
1,008,000
Complete this question by entering your answers in the tabs below.
Req 2
1. Interest capitalized
3. Interest expense
1. Calculate the amount of interest that Mason should capitalize in 2024 and 2025 using the specific interest method.
3. Calculate the amount of interest expense that will appear in the 2024 and 2025 income statements.
Note: Enter your answers in whole dollars and not in millions. Do not round intermediate calculations.
2024
2025
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