On January 1, 2016, the Mason Manufacturing Company began construction of a building to be used as its office headquarters. The building was completed on September 30, 2017.

Expenditures on the project were as follows:

January 1, 2016	$	1,000,000
March 1, 2016		600,000
June 30, 2016		800,000
October 1, 2016		600,000
January 31, 2017		270,000
April 30, 2017		585,000
August 31, 2017		900,000

On January 1, 2016, the company obtained a $3 million construction loan with a 10% interest rate. The loan was outstanding all of 2016 and 2017. The companys 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 2016 and 2017. Interest is paid annually on all debt. The companys fiscal year-end is December 31.

Required 1. Calculate the amount of interest that Mason should capitalize in 2016 and 2017 using the specific interest method. 2016 2017 Interest capitalized 2. What is the total cost of the building? Total cost of building 3. Calculate the amount of interest expense that will appear in the 2016 and 2017 income statements. 2016 2017 Interest expense References eBook & Resources Worksheet Difficulty: 3 Hard Problem 10-9 Interest capitalization; Learning Objective: 10-07 Identify the items specific interest method [L010-7] ncluded in the cost of a self-constructed asset and determine the amount of capitalized interest