On January 1, 2021, Company A began the 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: Company A January 1, 2021 $2,000,000 March 1, 2021 1,600,000 June 30, 2021 1,800,000 October 1, 2021 1,600,000 January 31, 2022 1,270,000 April 30, 2022 1,585,000 August 31, 2022 1,900,000
On January 1, 2021, Company A began the 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:
Company A
January 1, 2021 $2,000,000
March 1, 2021 1,600,000
June 30, 2021 1,800,000
October 1, 2021 1,600,000
January 31, 2022 1,270,000
April 30, 2022 1,585,000
August 31, 2022 1,900,000
Construction loan amount $4,000,000
Construction loan interest rate 8%
Long-term note $5,000,000
Long-term note interest rate 4%
Long-term note $7,000,000
Long-term note interest rate 6%
On January 1, 2021, the company obtained a $4 million construction loan with a 8% interest rate. The loan was outstanding all of 2021 and 2022. The company's other interest-bearing debt included two long-term notes of $5,000,000 and 7,000,000 with interest rates of 4% and 6%, 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.
1) Calculate the amount of interest that the company should capitalize in 2021 and 2022 using the specific interest method.
2) What is the total cost of the building?"
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