1answer.
Ask question
Login Signup
Ask question
All categories
  • English
  • Mathematics
  • Social Studies
  • Business
  • History
  • Health
  • Geography
  • Biology
  • Physics
  • Chemistry
  • Computers and Technology
  • Arts
  • World Languages
  • Spanish
  • French
  • German
  • Advanced Placement (AP)
  • SAT
  • Medicine
  • Law
  • Engineering
natima [27]
2 years ago
11

On January 1, 2021, the company obtained a $3 million loan with a 14% interest rate. The building was completed on September 30,

2022. Expenditures on the project were as follows:
January 1, 2021 $ 1,050,000March 1, 2021 870,000June 30, 2021 390,000October 1, 2021 690,000January 31, 2022 675,000April 30, 2022 990,000August 31, 2022 1,710,000On January 1, 2021, the company obtained a $3 million construction loan with a 14% interest rate. Assume the $3 million loan is not specifically tied to construction of the building. The loan was outstanding all of 2021 and 2022. The company’s other interest-bearing debt included two long-term notes of $4,900,000 and $6,900,000 with interest rates of 5% and 7%, 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.
Required:
1. Calculate the amount of interest that Mason should capitalize in 2021 and 2022 using the weighted-average method.
2. What is the total cost of the building?
3. Calculate the amount of interest expense that will appear in the 2021 and 2022 income statements.
Business
1 answer:
Svet_ta [14]2 years ago
4 0

Answer:

1. Calculate the amount of interest that Mason should capitalize in 2021 and 2022 using the weighted-average method.

interest capitalized in 2021 = $166,189

interest capitalized in 2022 = $77,956

2. What is the total cost of the building?

total construction costs ($6,375,000) + capitalized interests ($244,145) = $6,619,145

3. Calculate the amount of interest expense that will appear in the 2021 and 2022 income statements.

interest expense 2021 = $1,148,000 - $166,189 = $981,811

interest expense 2022 = $1,148,000 - $77,956 = $1,070,044

Explanation:

a 14%, $3,000,000 loan obtained on January 1, 2021

building was completed on September 30,2022

January 1, 2021: $1,050,000 x 12/12 = $1,050,000

March 1, 2021: $870,000 x 10/12 = $725,000

June 30, 2021: $390,000 x 6/12 = $195,000

October 1, 2021: $690,000 x 3/12 = $172,500

total weighted average expense 2021 = $2,142,500

weighted average interest rate:

$3,000,000 x 14% = $420,000

$4,900,000 x 5% = $245,000

$6,900,000 x 7% = $483,000

average interest rate = $1,148,000 / $14,800,000 = 7.7568%

interest capitalized in 2021 = $2,142,500 x 7.7568% = $166,189

January 31, 2022: $675,000 x 8/9 = $600,000

April 30, 2022: $990,000 x 5/9 = $550,000

August 31, 2022: $1,710,000 x 1/9 = $190,000

total weighted average expense 2021 = $1,340,000

weighted average interest rate:

$3,000,000 x 14% = $420,000

$4,900,000 x 5% = $245,000

$6,900,000 x 7% = $483,000

average interest rate = $1,148,000 / $14,800,000 = 7.7568%

interest capitalized in 2022 = $1,340,000 x 7.7568% x 9/12 = $77,956

You might be interested in
Briefly describe an experiment that would test the premack differential probability principle
amm1812
An experiment that could test the Premack differential probability rule is as per the following; the kids are given two reaction choices, one for playing pinball machine and another for eating confection and these practices are evaluated to figured out which is more plausible for every kid. A portion of the youngsters who discovered to favor one movement. In the second period of the trial, the testing of the youngsters was directed with one oF the two systems. In the primary strategy, eating was a fortifying reaction while playing pinball was the instrumental reaction implying that the youngsters played pinball keeping in mind the end goal to eat the confection.
6 0
3 years ago
At the beginning of the current period, Shamrock Corp. had balances in Accounts Receivable of $187,800 and in Allowance for Doub
nignag [31]

Answer:

See below

Explanation:

The net realizable values are as follows

ai For accounts receivables

Ending balance of account receivables = Beginning balance of account receivables + Credit sale - Collections uncollectible amount

= $187,800 + $860,400 - $687,720

= $360,480

aii For allowance for doubtful debt

= Beginning balance + Previously written off amount - Uncollectible amount + Bad debt expense

= $9,630 + $2,859 - $7,381 + $18,412

= $23,070

6 0
2 years ago
Say that Alland can produce 32 units of food per person per year or 16 units of clothing per person per year, but Georgeland can
bixtya [17]

Answer:

Georgeland has an absolute but not a comparative advantage in producing clothing.

Explanation:

Absolute advantage is defined as the ability of a firm to produce higher amounts of a product as a result of use of the same resources with other competitors. It is usually bad a result of more efficient production process.

Comparative advantage is the ability of a firm to produce goods at a lower opportunity cost. Therefore they are able to sell at lower price compared to competitors.

Georgeland can produce 18 units of clothe per year while Alland can produce 16 units per year, so Georgeland has absolute advantage.

In producing clothes Georgeland has opportunity cost of 36 units of food which is higher than that of Alland which is 32 units of food. So Georgeland does not have comparative advantage in producing clothes.

3 0
2 years ago
Sandra views herself as a tough but fair supervisor. She gives explicit instructions to her subordinates about how tasks should
Luden [163]

Answer:Telling style leadership

Explanation: According to Hersey and Blanchard’s situational model of leadership, The telling style is an authoritarian type of leadership ususally directed or used with low- maturity followers where the leader gives explicit directions and instructions on how tasks should be performed and orders are not subject to interpretation

This type of leadership usually occurs when the leader has an expertise in the area which he or she specializes and so gives clear, precise quick and controlled instructions for efficient  implementation.

Here, Sandra uses the Telling style leadership to accomplish tasks and performances.

4 0
3 years ago
Read 2 more answers
sara works in the IT department for a large retail store. She has been testing a theory about why an error message keeps popping
Nataly_w [17]

Answer: Sara must take a break and come back later.

Explanation: Have you ever struggled with hard problem and found that no matter how much you tried to figure it out, the answer just won’t come to you? This is an all-too-common problem for scientists, philosophers, mathematicians, novelists, musicians, and countless intellectuals alike. But as anyone who wrestles with creative/intellectual problems on the regular will tell you, the solution to a tough problem will often come at a time when they are not focused on the problem directly. To the contrary, solutions to problems often come when they are doing completely unrelated, like taking a walk or in the shower. Working for long stretches without breaks leads to stress and exhaustion. Taking breaks refreshes the mind, replenishes your mental resources, and helps you become more creative. Problem-solving may seem straightforward at first glance, but there are many employees who stumble over one or more of the critical steps, failing to successfully resolve workplace issues. Successful problem-solving requires several important skills that will help you proceed efficiently from identification to implementation.

6 0
3 years ago
Other questions:
  • An import quota
    7·1 answer
  • A purchase order is created by the accounting department. <br> a. True <br> b. False
    7·1 answer
  • Anna's family was expecting a lower EFC than they received. Anna's mother suggests changing the Parent's Gross
    9·2 answers
  • Indicate whether a change in the value of each of the following determinants of demand leads to a movement along the demand curv
    13·1 answer
  • Price Company provides cleaning services to customers for $10,000 cash. What are the effects of this transaction on the accounti
    11·1 answer
  • Năm trước, doanh thu đạt được 1 triệu $, trong đó 250.000 là doanh thu bán chịu; số dư khoản phải thu khách hàng trung bình là 4
    6·1 answer
  • ​Bradley's Copiers sells and repairs photocopy machines. The manager needs weekly forecasts of service calls so that he can sche
    12·1 answer
  • A 10-year loan of 120,000 is to be repaid with payments at the end of each month. Interest is at an annual effective rate of 6.0
    13·1 answer
  • Provide theoretical underpinnings of empirical findings in Wang (2018b) and Wang and Duxbury (2021).
    15·1 answer
  • Assuming noah made 6-month payments on its wood purchases from indonesia, what is the schedule of foreign currency amounts over
    9·1 answer
Add answer
Login
Not registered? Fast signup
Signup
Login Signup
Ask question!