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:

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 companys 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 companys 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.