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Task1. On January 1, 2013, Mason Manufacturing Company began construction of building to be employed as its office headquarters. The building was completed on September 30, 2014.

Expenditures on project were as follows:

January 1, 2013                    $ 1,200,000    
March 1, 2013                           690,000    
June 30, 2013                           450,000    
October 1, 2013                        660,000    
January 31, 2014                       945,000    
April 30, 2014                         1,260,000    
August 31, 2014                      2,250,000    

On January 1, 2013, the company acquired a $3 million construction loan with the 12% interest rate. The loan was outstanding all of 2013 and 2014. The company’s other interest-bearing debt included two long-term notes of $5,500,000 and $7,500,000 with interest rates of 9%and 7%, respectively. Both notes were outstanding throughout all of 2013 and 2014. Interest is paid annually on all debt. The company’s fiscal year-end is December 31.

Required:

problem1. Compute the amount of interest that Mason must capitalize in 2013 and 2014 using the weighted-average method.

problem2. What is the total cost of building?

problem3. Compute the amount of interest expense which will appear in the 2013 and 2014 income statements.

Financial Accounting, Accounting

  • Category:- Financial Accounting
  • Reference No.:- M94201

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