On June 1, 2015, the Crocus Company began construction of a newmanufacturing plant. The plant was completed on October 31, 2016.Expenditures on the project were as follows ($ inmillions):
July 1, 2015 54 October 1, 2015 22 February 1, 2016 30 April 1, 2016 21 September 1, 2016 20 October 1, 2016 6
On July 1, 2015, Crocus obtained a $70 million construction loanwith a 6% interest rate. The loan was outstanding through the endof October, 2016. The company's only other interest-bearing debtwas a long-term note for $100 million with an interest rate of 8%.This note was outstanding during all of 2015 and 2016. Thecompany's fiscal year-end is December 31.
What is the amount of interest that Crocus should capitalize in2016, using the specific interest method (rounded to the nearestthousand dollars)?
$7,248,000 (rounded).
$7,283,000 (rounded).
$8,740,000 (rounded).
None of these answer choices are correct.
On June 1, 2015, the Crocus Company began construction of a newmanufacturing plant. The plant was completed on October 31, 2016.Expenditures on the project were as follows ($ inmillions):
| July 1, 2015 | 54 |
| October 1, 2015 | 22 |
| February 1, 2016 | 30 |
| April 1, 2016 | 21 |
| September 1, 2016 | 20 |
| October 1, 2016 | 6 |
On July 1, 2015, Crocus obtained a $70 million construction loanwith a 6% interest rate. The loan was outstanding through the endof October, 2016. The company's only other interest-bearing debtwas a long-term note for $100 million with an interest rate of 8%.This note was outstanding during all of 2015 and 2016. Thecompany's fiscal year-end is December 31.
What is the amount of interest that Crocus should capitalize in2016, using the specific interest method (rounded to the nearestthousand dollars)?
$7,248,000 (rounded).
$7,283,000 (rounded).
$8,740,000 (rounded).
None of these answer choices are correct.
Related questions
| 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 | $ | 1,230,000 | |
| March 1, 2016 | 720,000 | ||
| June 30, 2016 | 380,000 | ||
| October 1, 2016 | 670,000 | ||
| January 31, 2017 | 990,000 | ||
| April 30, 2017 | 1,305,000 | ||
| August 31, 2017 | 2,340,000 | ||
| On January 1, 2016, the company obtained a $3 million construction loan with a 12% interest rate. The loan was outstanding all of 2016 and 2017. The companyâs other interest-bearing debt included two long-term notes of $5,600,000 and $7,600,000 with interest rates of 8% and 10%, respectively. Both notes were outstanding during all of 2016 and 2017. Interest is paid annually on all debt. The companyâs fiscal year-end is December 31. Assume the $3 million loan is not specifically tied to construction of the building. |
| Required: |
| 1. | Calculate the amount of interest that Mason should capitalize in 2016 and 2017 using the weighted-average method. (Do not round intermediate calculations. Round your answers to the nearest whole dollars.) |
| 2. | What is the total cost of the building? (Do not round intermediate calculations. Round your answer to the nearest whole dollar.) |
| 3. | Calculate the amount of interest expense that will appear in the 2016 and 2017 income statements. (Do not round intermediate calculations. Round your answers to the nearest whole dollars.) |
| 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 | $ | 1,360,000 | |
| March 1, 2016 | 810,000 | ||
| June 30, 2016 | 160,000 | ||
| October 1, 2016 | 670,000 | ||
| January 31, 2017 | 585,000 | ||
| April 30, 2017 | 900,000 | ||
| August 31, 2017 | 1,530,000 | ||
| On January 1, 2016, the company obtained a $3 million construction loan with a 10% interest rate. The loan was outstanding all of 2016 and 2017. The companyâs other interest-bearing debt included two long-term notes of $4,700,000 and $6,700,000 with interest rates of 7% and 9%, respectively. Both notes were outstanding during all of 2016 and 2017. Interest is paid annually on all debt. The companyâs fiscal year-end is December 31. Assume the $3 million loan is not specifically tied to construction of the building. |
| Required: |
| 1. | Calculate the amount of interest that Mason should capitalize in 2016 and 2017 using the weighted-average method. (Do not round intermediate calculations. Round your answers to the nearest whole dollars.) |
| 2. | What is the total cost of the building? (Do not round intermediate calculations. Round your answer to the nearest whole dollar.) |
| 3. | Calculate the amount of interest expense that will appear in the 2016 and 2017 income statements. (Do not round intermediate calculations. Round your answers to the nearest whole dollars.) |
