On January 1, 2013, the Mason Manufacturing Company began construction of a building to be used as its office headquarters. The building was completed on September 30, 2014. Expenditures on the

On January 1, 2013, the Mason Manufacturing Company began construction of a building to be used as its office headquarters. The building was completed on September 30, 2014.

Expenditures on the project were as follows:

January 1, 2013 \$ 1,000,000

March 1, 2013 600,000

June 30, 2013 800,000

October 1, 2013 600,000

January 31, 2014 270,000

April 30, 2014 585,000

August 31, 2014 900,000

On January 1, 2013, the company obtained a \$3 million construction loan with a 10% interest rate. The loan was outstanding all of 2013 and 2014. 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 2013 and 2014. 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 2013 and 2014 using the specific interest method. (Round the Weighted-average rate to 1 decimal place. Enter your answers in dollars not in millions.)

2013 2014

Interest capitalized \$ \$

2.

What is the total cost of the building? (Round the Weighted-average rate to 1 decimal place. Enter your answer in dollars not in millions.)

Total cost of building \$

3.

Calculate the amount of interest expense that will appear in the 2013 and 2014 income statements. (Round the Weighted-average rate to 1 decimal place. Enter your answers in dollars not in millions.)

2013 2014

Interest expense \$ \$