Reference no: EM132740639

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:

January 1, 2021          $1,230,000

March 1, 2021                720,000

June 30, 2021                  380,000

October 1, 2021                 670,000

January 31, 2022               990,000

April 30, 2022                       1,305,000

August 31, 2022                 2,340,000

• 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:

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

Problem 2. What is the total cost of the building?

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