$Ch10In-$class exercise$(4)$

Problem $10-9$ Interest capitalization; specific interest method

$On$ January $1,2021,$ the Mason Manufacturing Company began construction $of$ a building $tobe$ used $as$ its office headquarters. The building was completed $on$ September $30,2022.$ Expenditures $on$ the project were $as$ follows:

$\frac{1}{1}\frac{?}{2021}1,090,000$ Req $2$ what $is$ the total cost $of$ the building? $(Do$ not round intermediate calculations.$)$

Total cost $of$ building

$2$

$\frac{3}{1}\frac{?}{2021}\frac{6}{30}\frac{?}{2021}\frac{10}{1}\frac{?}{2021}\frac{1}{31}\frac{?}{2022}\frac{4}{30}\frac{?}{2022}\frac{8}{31}\frac{?}{2022}$

$780,000980,000780,000297,000630,000927,000$

$On$ January $1,2021,$ the company obtained $a$ $$3,300,000$ construction loan with $a16\%$ interest rate. The loan was outstanding all $of2021$ and $2022.$ The company$s$ other interest$-$bearing debt included two long$-$term notes $of$ $$2,000,000$ and $$8,000,000$ with interest rates $of10\%$ and $12\%,$ respectively. Both notes were outstanding during all $of2021$ and $2022.$ Interest $is$ paid annually $on$ all debt. The company$s$ fiscal year$-$end $is$ December $31.$

Req. $1$ and $3$

Calculate the amount $of$ interest that Mason should capitalize $in2021$ and $2022$ using the specific interest method and interest expense that will appear $in$ the $2021$ and $2022$ income statements. $(Do$ not round intermediate calculations.$)$

$On$ January $1,2021,$ the Mason Manufacturing Company began construction $of$ a building $tobe$ used $as$ its office

headquarters. The building was completed $on$ September $30,2022.$ Expenditures $on$ the project were $as$ follows:

$On$ January $1,2021,$ the company obtained $a$ $$3,300,000$ construction loan with $a16\%$ interest rate. The loan was

outstanding all $of2021$ and $2022.$ The company's other interest$-$bearing debt included two long$-$term notes $of$ $$2,000,000$

and $$8,000,000$ with interest rates $of10\%$ and $12\%,$ respectively. Both notes were outstanding during all $of2021$ and

Interest $is$ paid annually $on$ all debt. The company's fiscal year$-$end $is$ December $31.$

Req. $1$ and $3$

Calculate the amount $of$ interest that Mason should capitalize $in2021$ and $2022$ using the specific interest

method and interest expense that will appear $in$ the $2021$ and $2022$ income statements. $(Do$ not round

intermediate calculations.$)$

$20212022$

Interest capitalized

Interest expense

Explanation:

$\frac{1}{1}\frac{?}{2021}$

$\frac{3}{1}\frac{?}{2021}$

$\frac{6}{30}\frac{?}{2021}$

$\frac{10}{1}\frac{?}{2021}$

Accumulated expenditures

$(before$ interest$)$

Average accumulated expenditures

$\frac{1}{1}\frac{?}{2022}$

$\frac{1}{31}\frac{?}{2022}$

$\frac{4}{30}\frac{?}{2022}$

$\frac{8}{31}\frac{?}{2022}$

Accumulated expenditures

$(before$ interest$)$

$1,090,000x=$

$780,000x=$

$980,000x=$

$780,000x=$