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: January 1, 2024 March 1, 2024 June 30, 2024 October 1, 2024 January 31, 2025 April 30, 2025 August 31, 2025 $ 1,170,000 840,000 1,040,000 840,000 306,000 639,000 900,000 On January 1, 2024, the company obtained a $3,000,000 construction loan with a 15% interest rate. The loan was outstanding all o 2024 and 2025. The company's other interest-bearing debt included two long-term notes of $3,000,000 and $9,000,000 with inte rates of 9% and 13%, respectively. Both notes were outstanding during all of 2024 and 2025. Interest is paid annually on all debt. T company's fiscal year-end is December 31. Required: 1. Calculate the amount of interest that Mason should capitalize in 2024 and 2025 using the specific interest 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.
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: January 1, 2024 March 1, 2024 June 30, 2024 October 1, 2024 January 31, 2025 April 30, 2025 August 31, 2025 $ 1,170,000 840,000 1,040,000 840,000 306,000 639,000 900,000 On January 1, 2024, the company obtained a $3,000,000 construction loan with a 15% interest rate. The loan was outstanding all o 2024 and 2025. The company's other interest-bearing debt included two long-term notes of $3,000,000 and $9,000,000 with inte rates of 9% and 13%, respectively. Both notes were outstanding during all of 2024 and 2025. Interest is paid annually on all debt. T company's fiscal year-end is December 31. Required: 1. Calculate the amount of interest that Mason should capitalize in 2024 and 2025 using the specific interest 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.
SWFT Essntl Tax Individ/Bus Entities 2020
23rd Edition
ISBN:9780357391266
Author:Nellen
Publisher:Nellen
Chapter5: Business Deductions
Section: Chapter Questions
Problem 29P
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