Question
On January 1, 2016, the Mason Manufacturing Company began construction of a building to be used...
|
On January 1, 2016, the Mason Manufacturing Company began construction of a building to be used as its office headquarters. The building was completed on September 30, 2017. |
|
Expenditures on the project were as follows: |
|
January 1, 2016 |
$ |
1,000,000 |
|
March 1, 2016 |
800,000 |
|
|
June 30, 2016 |
1,500,000 |
|
|
October 1, 2016 |
1,000,000 |
|
|
January 31, 2017 |
300,000 |
|
|
April 30, 2017 |
600,000 |
|
|
August 31, 2017 |
900,000 |
On January 1, 2016, the company obtained a $8.000,000 construction loan with a 12% interest rate. The loan was outstanding all of 2016 and 2017. The company’s fiscal year-end is December 31.
- Calculate the amount of interest capitalized for 2016 and 2017.
- What is the total cost of the building?
|
Date |
Expenditure |
Weight |
Average |
||
|
Accumulated expenditure |
|
Average |
Interest Rate |
Capitalized Interest |
||||
|
Average accumulated expenditures |
x |
% |
X /12 |
= |
||
|
Date |
Expenditure |
Weight |
Average |
||
|
January 1, 2017 (incurred in 2016+ capitalized Interest for 2016) |
x |
= |
|||
|
Accumulated expenditure |
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