Reference no: EM132436593

Question - On January 1, 2018, the Mason Manufacturing Company began construction of a building to be used as its office headquarters. The building was completed on September 30, 2019.

Expenditures on the project were as follows:

January 1, 2013	$1,050,000
March 1, 2018	870,000
June 30, 2018	390,000
October 1, 2018	690,000
January 31, 2019	675,000
April 30, 2019	990,000
August 31, 2019	1,710,000

On January 1, 2018, the company obtained a $3 million construction loan with a 14% interest rate. The loan was outstanding all of 2018 and 2019. 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 2018 and 2019. Interest is paid annually on all debt. The company's 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 2018 and 2019 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 2018 and 2019 income statements.