Alta Company is constructing a production complex that qualifies for interest capitalization. The following information is available:
• Capitalization period: January 1, 2019, to June 30, 2020
• Expenditures on project:
2019
January 1 .............................................$ 540,000
May 1 .....................................................465,000
October 1 .............................................600,000
2020:
March 1 .....................................................1,500,000
June 30 .........................................................600,000
• Amounts borrowed and outstanding:
°° $1.5 million borrowed at 12%, specifically for the project
°° $6 million borrowed on July 1, 2015, at 14%
°° $14 million borrowed on January 1, 2014, at 8%

Required:
1. Compute the amount of interest costs capitalized each year.
2. If it is assumed that the production complex has an estimated life of 20 years and a residual value of $0, compute the straight-line depreciation in 2020.
3. Next Level Explain the effects of the interest capitalization on the financial statements for both years. Ignore income taxes.