On January 1, 2021, the Mason Manufacturing Company began construction of a building to be used as its office headquarters. The building was completed on September 30, 2022. Expenditures on the project were as follows: January 1, 2021 March 1, 2021 June 30, 2021 October 1, 2021 January 31, 2022 April 30, 2022 August 31, 2022 $2,050,000 1,800,000 2,000,000 1,800,000 450,000 783,000 1,080,000 On January 1, 2021, the company obtained a $5,000,000 construction loan with a 9% interest rate. The loan was outstanding all of 2021 and 2022. The company's other interest-bearing debt included two long-term notes of $6,000,000 and $9,000,000 with interest rates of 5% and 8%, respectively. Both notes were outstanding during all of 2021 and 2022. Interest is paid annually on all debt. The company's fiscal year-end is December 31. 1. What is the amount of interest to be capitalized in 2021, and 2022? 2. What is the amount of interest expense that will appear in the 2021, and 2022 income statements? 3. What is the total cost of the building?
On January 1, 2021, the Mason Manufacturing Company began construction of a building to be used as its office headquarters. The building was completed on September 30, 2022. Expenditures on the project were as follows: January 1, 2021 March 1, 2021 June 30, 2021 October 1, 2021 January 31, 2022 April 30, 2022 August 31, 2022 $2,050,000 1,800,000 2,000,000 1,800,000 450,000 783,000 1,080,000 On January 1, 2021, the company obtained a $5,000,000 construction loan with a 9% interest rate. The loan was outstanding all of 2021 and 2022. The company's other interest-bearing debt included two long-term notes of $6,000,000 and $9,000,000 with interest rates of 5% and 8%, respectively. Both notes were outstanding during all of 2021 and 2022. Interest is paid annually on all debt. The company's fiscal year-end is December 31. 1. What is the amount of interest to be capitalized in 2021, and 2022? 2. What is the amount of interest expense that will appear in the 2021, and 2022 income statements? 3. What is the total cost of the building?
SWFT Essntl Tax Individ/Bus Entities 2020
23rd Edition
ISBN:9780357391266
Author:Nellen
Publisher:Nellen
Chapter5: Business Deductions
Section: Chapter Questions
Problem 29P
Related questions
Question
What are the answers to the three questions listed?
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
This is a popular solution!
Trending now
This is a popular solution!
Step by step
Solved in 3 steps
Follow-up Questions
Read through expert solutions to related follow-up questions below.
Follow-up Question
how did you get these numbers ?
Year 2022: Weighted-Average accumulated expenditure | |||
Date | Amount | Capitalization period | Weighted Average Accumulated Expenditures |
1-Jan-22 | $8,100,000 | 9/9 | $8,100,000 |
31-Jan-22 | $450,000 | 8/9 | $400,000 |
30-Apr-22 | $783,000 | 5/9 | $435,000 |
31-Aug-22 | $1,080,000 | 1/9 | $120,000 |
Total | $10,413,000 | $9,055,000 |
Solution
by Bartleby Expert
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Recommended textbooks for you
Individual Income Taxes
Accounting
ISBN:
9780357109731
Author:
Hoffman
Publisher:
CENGAGE LEARNING - CONSIGNMENT
Individual Income Taxes
Accounting
ISBN:
9780357109731
Author:
Hoffman
Publisher:
CENGAGE LEARNING - CONSIGNMENT
Intermediate Accounting: Reporting And Analysis
Accounting
ISBN:
9781337788281
Author:
James M. Wahlen, Jefferson P. Jones, Donald Pagach
Publisher:
Cengage Learning