On January 1, 2013, the Mason Manufacturing Company began construction of a building to be used as its office headquarters. The building was completed on September 30, 2014.
| Expenditures on the project were as follows: |
|
|
|
|
| January 1, 2013 |
$ |
1,230,000 |
|
| March 1, 2013 |
|
720,000 |
|
| June 30, 2013 |
|
380,000 |
|
| October 1, 2013 |
|
670,000 |
|
| January 31, 2014 |
|
990,000 |
|
| April 30, 2014 |
|
1,305,000 |
|
| August 31, 2014 |
|
2,340,000 |
|
|
|
On January 1, 2013, the company obtained a $3 million construction loan with a 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 $5,600,000 and $7,600,000 with interest rates of 8% and 10%, respectively. Both notes were outstanding during all of 2013 and 2014. Interest is paid annually on all debt. The company's fiscal year-end is December 31.
|
| 1. |
Calculate the amount of interest that Mason should capitalize in 2013 and 2014 using the weighted-average method. (Do not round intermediate calculations. Round the weighted average rate to 4 decimal places (e.g. 0.54321 to 54.32%). Enter your answers in dollars not in millions. Round your answers to the nearest dollar amount.)
|
|
2013 |
2014 |
| Interest capitalized |
$ |
$ |
|
| 2. |
What is the total cost of the building? (Do not round intermediate calculations. Round the weighted average rate to 4 decimal places (e.g. 0.54321 to 54.32%). Enter your answer in dollars not in millions. Round your answer to the nearest dollar amount.)
|
| 3. |
Calculate the amount of interest expense that will appear in the 2013 and 2014 income statements. (Do not round intermediate calculations. Round the weighted average rate to 4 decimal places (e.g. 0.54321 to 54.32%). Enter your answers in dollars not in millions. Round your answers to the nearest dollar amount.)
|
|
2013 |
2014 |
| Interest expense |
$ |
$ |