90.2K

Verified Solution

Link Copied!

Problem 10-10 (Algo) Interest capltallzation; welghted-average method [LO10-7] On January 1, 2024, the Mason Manufacturing Company began construction of a building to be used as its office headquarters. The building was completed on September 30,2025 . Expenditures on the project were as follows: On January 1, 2024, the company obtained a $3 million construction loan with a 11% interest rate. Assume the $3 million loan is not specifically tied to construction of the building. The loan was outstanding all of 2024 and 2025 . The company's other interest-bearing debt included two long-term notes of $5,700,000 and $7,700,000 with interest rates of 5% and 7%, respectively. Both notes were outstanding during all of 2024 and 2025 . Interest is paid annually on all debt. The company's fiscal year-end is December 31. Requlred: Using the weighted-average interest method, answer the following questions: 1. Calculate the amount of interest that Mason should capitalize in 2024 and 2025 using the weighted-average method. 2. What is the total cost of the building? 3. Calculate the amount of interest expense that will appear in the 2024 and 2025 income statements. Answer is complete but not entirely correct. Complete this question by entering your answers in the tabs below. What is the total cost of the building? Note: Round "Weighted-average rate of all debt" to 2 decimal places but do not round other intermediate calculations. Enter your answers in dollars rounded to the nearest whole number

Answer & Explanation Solved by verified expert

See Answer