Question

On January 1, 2021, the Mason Manufacturing Company began construction of a building to be used as its office headquarters. The building was completed on September 30, 2022. Expenditures on the project were as follows: January 1, 2021 March 1, 2021 June 30, 2021 October 1, 2021 January 31, 2022 April 30, 2022 August 31, 2022 $1,310,000 1,020,000 1,220,000 1,020,000 333,000 666,000 963,000 On January 1, 2021, the company obtained a $3,700,000 construction loan with a 12% interest rate. The loan was outstanding all of 2021 and 2022. The company's other interest-bearing debt included two long-term notes of $3,000,000 and $7,000,000 with interest rates of 8% and 10%, respectively. Both notes were outstanding during all of 2021 and 2022. 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 2021 and 2022 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 2021 and 2022 income statements. Complete this question by entering your answers in the tabs below. Reg 1 and 3 Reg 2 Calculate the amount of interest that Mason should capitalize in 2021 and 2022 using the specific interest method and interest expense that will appear in the 2021 and 2022 income statements. (Do not round intermediate calculations.) 2021 2022 Interest capitalized Interest expense

Answer 1

Selutien Average accumulateol expendetvar Expenditeres der 20a1 Tme pedor Amount 12/2 31o00o 1310000 Fanva 2021 lo/12 850000 Manch 2021 ID20 D00 Une 30 202 000o 6/12 1220000 actober 3/12 20 21 0 2000 0 255o00 45000D 30 2500D Total Interast capitalrzed 3025000 X12-/ 363000 Average accumuladed Experdthures 2033 Tme pulod Amount expenditere Tanuay, 2023 4133000 4433000 333 000 Tavry31,3032 29600o 6८6०० ০ 5/9 April 30, 2022 370000 763000 o7000 August 31, 2022 6895000 50GO00 To tal Wagh ted avenage Interest ate Interast Amourt g nole 3000ooo R40000 lo note Too0000 Fo0000 To-tal looooo00 740000 welghted avenage Teust ate= y0000/t000c000 1.4%

Iakrest captalized : 124 333000 3700000 X12/ X 2006000 X 4.4/12xa 141423 474423 Total

2021 2022 Cnpitalized 363000 474423 Total Cost bding t50000 363000 1962000 +474423 2. 36 9423 Interest Experse 3T00000 12%-363000+940000- 2021 lo21000 ( 3700000% 12) - ua423 2022 940000 40957