1. On January 1, 2015, Costco began construction of a new warehouse in Redmond, WA. The building was completed on June 30, 2016. Cash outlays for the $5 million project were as follows: 2015 January 1 $1,000,000 March 1 $600,000 June 30 $800,000 September 30 $750,000 December 1 $600,000 2016 March 31 $800,000 June 30 $450,000 (final payment) Total payments $5,000,000 On January 1, 2015 Costco obtained a $3 million dollar construction loan with a 5% interest rate. Costcos other long-term debt consisted of $30 million 6% bonds and $20 million of 8% bonds. All debt was outstanding throughout 2015 and 2016.

a. Calculate the amount of interest to be capitalized in 2015.

b. Calculate the amount of interest to be capitalized in 2016.

c. What is the final total capitalized cost of the warehouse?

d. How much interest expense is reported in Costcos Income Statement for both 2015 and 2016?