On January 1, 2026, the Mason Manufacturing Company began construction of a building to be used as its office headquarters. The building was completed on September 30, 2027. Expenditures on the project were as follows: During 2026: January 3 March 1 June 30 October 1 During 2027: January 31 April 30 August 31 $1,000,000. 600,000 800,000 600,000 270,000 585,000 900,000 On January 1, 2026, the company obtained a $3 million construction loan with a 10% interest rate. The loan was outstanding all of 2026 and 2027. 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 2026 and 2027. Interest is paid annually on all debt. The company's financial year-end is December 31. Required: 1. Calculate the amount of interest that Mason should capitalize in 2026 and 2027. 2. What is the total cost of the building? 3. Calculate the amount of interest expense that will appear in the 2026 and 2027 income statements. Complete this question by entering your answers in the tabs below. Total cost of Building Req 1 and 3 Req 2 What is the total cost of the building? (Enter your answer in dollars.) 2027 2026 $ 5,332,110
On January 1, 2026, the Mason Manufacturing Company began construction of a building to be used as its office headquarters. The building was completed on September 30, 2027. Expenditures on the project were as follows: During 2026: January 3 March 1 June 30 October 1 During 2027: January 31 April 30 August 31 $1,000,000. 600,000 800,000 600,000 270,000 585,000 900,000 On January 1, 2026, the company obtained a $3 million construction loan with a 10% interest rate. The loan was outstanding all of 2026 and 2027. 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 2026 and 2027. Interest is paid annually on all debt. The company's financial year-end is December 31. Required: 1. Calculate the amount of interest that Mason should capitalize in 2026 and 2027. 2. What is the total cost of the building? 3. Calculate the amount of interest expense that will appear in the 2026 and 2027 income statements. Complete this question by entering your answers in the tabs below. Total cost of Building Req 1 and 3 Req 2 What is the total cost of the building? (Enter your answer in dollars.) 2027 2026 $ 5,332,110
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:On January 1, 2026, the Mason Manufacturing Company began construction of a building to be used as its office headquarters. The
building was completed on September 30, 2027.
Expenditures on the project were as follows:
During 2026:
January 31
March 1
June 30
October 1
During 2027:
January 31
April 30
August 31
$1,000,000
600,000
800,000
600,000
270,000
585,000
900,000
On January 1, 2026, the company obtained a $3 million construction loan with a 10% interest rate. The loan was outstanding all of
2026 and 2027. 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 2026 and 2027. Interest is paid annually on all debt. The
company's financial year-end is December 31.
Required:
1. Calculate the amount of interest that Mason should capitalize in 2026 and 2027.
2. What is the total cost of the building?
3. Calculate the amount of interest expense that will appear in the 2026 and 2027 income statements.
Complete this question by entering your answers in the tabs below.
Total cost of Building
Req 1 and 3
Reg 2
What is the total cost of the building? (Enter your answer in dollars.)
2026
$
2027
5,332,110
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