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: |
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| January 1, 2013 |
$ |
1,040,000 |
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| March 1, 2013 |
|
810,000 |
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| June 30, 2013 |
|
450,000 |
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| October 1, 2013 |
|
700,000 |
|
| January 31, 2014 |
|
1,125,000 |
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| April 30, 2014 |
|
1,440,000 |
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| August 31, 2014 |
|
2,610,000 |
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On January 1, 2013, the company obtained a $3 million construction loan with a 10% interest rate. The loan was outstanding all of 2013 and 2014. The company's other interest-bearing debt included two long-term notes of $5,900,000 and $7,900,000 with interest rates of 7% and 9%, 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.
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| 1. |
Calculate the amount of interest that Mason should capitalize in 2013 and 2014 using the weighted-average method. (Do not round your intermediate calculations. Enter your answers in whole dollars.)
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| 2. |
What is the total cost of the building? (Do not round your intermediate calculations. Enter your answers in whole dollars.)
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| 3. |
Calculate the amount of interest expense that will appear in the 2013 and 2014 income statements. (Do not round your intermediate calculations. Enter your answers in whole dollars.)
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