(Algo) Interest capitalization; specific interest method [LO10-7] On January 1, 2021, the Mason Manufacturing Company began construction of a building to be used as its office headquarters. 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 $1,000,000 600,000 800,000 600,000 270,000 585,000 900,000 On January 1, 2021, the company obtained a $3 million construction loan with a 10% interest rate. The loan was outstanding all of 2021 and 2022. The company's other interest-bearing debt included two long-term notes of $4,000,000 and $6,000,000 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 specific interest 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.
Req 1 and 3 Reg 2 Calculate the amount of interest that Mason should capitalize in 2021 and 2022 using the specific interest method and interest expense that will appear in the 2021 and 2022 income statements. (Do not round intermediate calculations. Enter your answers in dollars.) Interest capitalized Interest expense $ $ 2021 205,000 815,000 $ $ 2022 98,910 % 921,090
Req 1 and 3 Req 1 and 3 Reg 2 Reg 2 What is the total cost of the building? (Do not round intermediate calculations. Enter your answer in dollars.) Total cost of building $ 5,058,910