On January 1, 2016, the Mason Manufacturing Company began construction of a buil
ID: 2466693 • 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 $3 million construction loan with a 10% 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 6% and 8%, respectively. Both 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.
Calculate the amount of interest that Mason should capitalize in 2016 and 2017 using the specific interest method.
What is the total cost of the building?
Calculate the amount of interest expense that will appear in the 2016 and 2017 income statements.
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.
Explanation / Answer
Answer:1
Answer:2
Answer:3
2016 1-Jan-16 1,000,000*12/12 1000000 1-Mar-16 600000*10/12 500000 30-Jun-16 800000*6/12 400000 1-Oct-16 600000*3/12 150000 Accumulated interest before interest 3000000 Average accumulated expenditures 2050000 $205,0000 x 10% = $205,000 interest capitalized