Problem XXXXXXXXXXAlgo) Interest capitalization; weighted-average method [LO10-7] On January 1, 2021, the company obtained a $3 million loan with a 12% interest rate. The building was completed on...

Problem 10-10 (Algo) Interest capitalization; weighted-average method [LO10-7]

On January 1, 2021, the company obtained a $3 million loan with a 12% interest rate. The building was completed on September 30, 2022. Expenditures on the project were as follows:

On January 1, 2021, the company obtained a $3 million construction loan with a 12% 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 $5,600,000 and $7,600,000 with interest rates of 8% and 10%, 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.