Question

Please solve interest expense for 2021 & 2022, and the total cost of the building

Return to ton On January 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 S L .031 101011 June 30, 20 October 1, 2021 11 2022 pril 31, 2012 31 2022 1.910.000 1.620.000 1.320.000 2.620.000 423.000 156.100 1.053.500 J On January 1, 2021 the company and a $4700,000 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-temnotes of $6.000.000 id $9.000.000 thing rest rates of and respectively. Both notes were outstanding during all of 2021 and 2022. In i s paid annually on al debt. The company's fiscal year-endis December 31 Required: 1. Calculate the amount of interest that Maison should capital 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

Answer 1

Answer 3 :

Explanation:

Total interest incurred per year = ($4,700,000 * 12%) + ($6,000,000 * 8%) + ($9,000,000 * 10%) = $1,944,000

Interest expense for 2021 = Total interest incurred - Interest capitalized for 2021

= $1,944,000 - $549,000 = $1,395,000

Interest expense for 2022 = Total interest incurred - Interest capitalized for 2022

= $1,944,000 - $680,508 = $1,263,492

Answer 2 :

Total cost of the building = $10,431,508

Explanation:

Total expenditures on the project in 2021 ( $1,910,000 + $1,620,000 + $1,820,000 + $1,620,000)	$6,970,000
Total expenditures on the project in 2022 ($423,000 + $756,000 + $1,053,000)	$2,232,000
Total interest capitalized ($549,000 + $680,508)	$1,229,508
Total cost of the building	$10,431,508