Question

On January 1, 2021, the company obtained a $3 million loan with a 10% 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 $1,300,000 750,000 300,000 650,000 495,000 810,000 1,350,000 On January 1, 2021, the company obtained a $3 million construction loan with a 10% 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 $4,500,000 and $6,500,000 with interest rates of 5% and 7%, 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. Complete this question by entering your answers in the tabs below. Req 1 and 3 Reg 2 Calculate the amount of interest that Mason should capitalize in 2021 and 2022 using the weighted average method and interest expense that will appear in the 2021 and 2022 income statements. ("Round "Weighted average rate of all debt" to 2 decimal places but do not round other intermediate calculations. Round your answers to the nearest whole dollar.) 2021 2022 Interest capitalized Interest expense Reg 1 and 3 Req2 >
Attach the calculation process thank you

Answer 1

Part 1: weighted avg method date Jan 1,2021 Mar 1,2021 Jun 30,2021 Oct 1,2021 calculation of average accumulated expenditure-2021 expenditure capitalisation period weight weighted expenditure c=b/12 a*c 1300000 12 1.00 1300000 750000 10 0.83 625000 300000 6 0.50 150000 650000 3 0.25 162500 3000000 2237500 Weighted average rate of all debt: borrowing Interest rate Interest amount 3000000 12% 360000 4500000 5% 225000 6500000 7% 455000 14000000 1040000 7.43% Weighted average rate of all debt: (1040000/14000000) 166246 Interest capitalized in 2021 (2237500*7.43%)

calculation of average accumulated expenditure-2022 date expenditure capitalisation period weight weighted expenditure b c=b/9 a*c Jan 1,2022 (3000000+166246) 3166246 9 1.00 3166246 Jan 31,2022 495000 8 0.89 440000 Apr 30,2022 810000 5 0.56 450000 Aug 31,2022 1350000 1 0.11 150000 5821246 4206246 234,393 Interest capitalized in 2022 (4206246*7.43%*9/12) Part 2: Expenditures in 2021 Interest capitalized in 2021 Expenditures in 2022 (495000+810000+1350000) Interest capitalized in 2022 Total cost of building | 3000000 166246 2655000| 234,393 6,055,639 Part 3: calculation of Interest Expense Total interest incurred Less: Interest Capitalized 2021 1040000 166246 873754 2022 1040000 234,393 805,607 Interest Expense