Problem 10-10 (Algo) Interest capitalization; weighted-average method [LO10-71

On January 1, 2021, the company obtained a $3 million loan with a 11% interest rate. The building was completed on September 30,

2022. Expenditures on the project were as follows:

January 1, 2021

March 1, 2021

June 30, 2021

October 1, 2021

January 31, 2022

April 30, 2022

August 31, 2022

$1,290,000

780,000

240,000

690.000

1,080,000

1,395.000

2,520,000

On January 1, 2021, the company obtained a $3 million construction loan with a 11% 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 $5,800,000 and $7,800,000 with interest rates of 6% and 8%, 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.

Problem 10-10 (Algo) Interest capitalization; weighted-average method [LO10-7] On January 1, 2021, the company obtained a $3 million Ioan with a 11\% 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 11% 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 $5,800,000 and $7,800,000 with interest rates of 6% and 8%, 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