TB Problem 10-183 (Static) On January 3, 2021, Michelson & Sons acquired a tract of land just outside the city limits. The land and existing building were purchased for $2.4 million. Michelson paid $400,000 and signed a noninterest-bearing note requiring the company to pay the remaining $2,000,000 on December 31, 2022. An interest rate 7% properly reflects the time value of money for this type of loan agreement. Transfer taxes, title insurance, and other costs totaling $24,000 were paid at closing. At the end of February, the old building was demolished at a cost of $120,000, and an additional $100,000 was paid to clear and grade the land. Construction of a new building began on March 1 and was completed on October 30. Construction expenditures were as follows: March 30 June 30 July 30 September 1 $ 800,000 1,200,000 1,200,000 600,000 Michelson did not borrow specifically for the construction project, but did have the following debt outstanding throughout 2021: $6,000,000, 8% long-term note payable $2,000,000, 5% long-term note payable In December, the company purchased equipment and office furniture and fixtures for a lump-sum price of $800,000. The fair values of the equipment and the furniture and fixtures were $540,000 and $360,000, respectively. In December, Michelson paid $340,000 for the construction of parking lots and landscaping. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) (Use appropriate factor(s) from the tables provided. Round other intermediate calculations to the nearest whole dollar. Enter your answers in whole dollars.) Required: 1. Determine the initial values of the various assets that Michelson acquired or constructed during 2021. 2. How much interest expense will Michelson report in its 2021 income statement? Answer is complete but not entirely correct. 1. Land Land improvements Building Equipment Furniture & fixtures Interest expense Initial Values $ 2,390,880 S 340,000 $ 3,891,833 IS 480,000 XOX S 320,000 2. S 610.449