Activity 1. Getting acquainted with the essentials in computing and accounting treatment of borrowing costs, what also matters is you should also be able to solve and analyze problems on borrowing costs. Now, I will require you to answer this problem. Problem 1(Adapted C. Valix, J. Peralta, C. Valix 2017 page 1169 Mildred Company borrowed 5,200,000 on a 10% note payable to finance a new warehouse which the entity is constructing for own use. The only other debt of the entity is a 7,800,000, 12% mortgage payable on an office building. At the end of the current year, average accumulated expenditures on the new warehouse totalled 6,175,000. What amount of interest should be capitalized for the current year? a. 520,000 b. 617,500 c. 637,000 d. 679,250 Problem 2.(Adapted C. Valix, J. Peralta, C. Valix 2017 page 1163) On January 1, 2017, Sheena Company borrowed 2,800,000 at an interest rate of 12% specifically for the construction of a new building The actual interest cost on this specific borrowing was 336,000 but interest of 14,000 was earned from the temporary investment of the borrowing proceeds. Sheena company also had the following other loans in 2017 for general purposes but the proceeds were used in part for the construction of the building, Principal Interest 10% bank loan 4,200,000 420,000 12% long term loan 7,000,000 840,000 The construction began on January 1, 2017 and was completed on December 31, 2017. The expenditures on the construction were 2,800,000 on Jan. 1, 1,400,000 on March 31 and 4,200,000 on Sept.30. Required: Compute the cost of the new building