On January 1, 2016, the Mason Manufacturing Company began construction of a buil
ID: 2463985 • Letter: O
Question
On January 1, 2016, the Mason Manufacturing Company began construction of a building to be used as its office headquarters. The building was completed on September 30, 2017. On January 1, 2016, the company obtained a $4,200,000 construction loan with a 16% interest rate. The loan was outstanding all of 2016 and 2017. 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. beth notes were outstanding during all of 2016 and 2017. 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 2016 and 2017 using the specific interest methed.Explanation / Answer
1. Calculate the amount of interest that Mason should capitalize in 2016 and 2017 using the weighted-average method.
$3,900,,000 x 16% = $624,000 = Interest capitalized in 2016
Expenditure for 2016 January 1 ,2016 1710000 ,12/12 1710000 March 1,2016 1320000 ,10/12 1100000 June 30,2016 1520000 ,6/12 760000 Octomber 1,2016 1320000 ,3/12 330000 Accumulated Expenditure before interest 5870000 Average Accumulated Depriciation 3900000