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.

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.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Question

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.
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
$ 1,710,000
1,320,000
1,520,000
1,320,000
Req 2
378,000
711,000
1,008,000
Complete this question by entering your answers in the tabs below.
1. Interest capitalized
3. Interest expense
X Answer is complete but not entirely correct.
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
624,000 $
$
$ 1,368,000
2025
672,000 X
$ 1,320,000

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