On january 1, 2018, the company obtained a $3 million construction loan with a 10% interest rate. the loan was outstanding all of 2018 and 2019. the company’s other interest-bearing debt included two long-term notes of $5,900,000 and $7,900,000 with interest rates of 7% and 9%, respectively. both notes were outstanding during all of 2018 and 2019. interest is paid annually on all debt. the company’s fiscal year-end is december 31. assume the $3 million loan is not specifically tied to construction of the building. required:
1. calculate the amount of interest that mason should capitalize in 2018 and 2019 using the weighted-average method.
2. what is the total cost of the building?
3. calculate the amount of interest expense that will appear in the 2018 and 2019 income statements.

In the fall, jay thompson decided to live in a university dormitory. he signed a dorm contract under which he was obligated to pay the room rent for the full college year. one clause stated that if he moved out during the year, he could sell his dorm contract to another student who would move into the dormitory as his replacement. the dorm cost was $5000 for the two semesters, which jay had already paid a month after he moved into the dorm, he decided he would prefer to live in an apartment. that week, after some searching for a replacement to fulfill his dorm contract, jay had two offers. one student offered to move in immediately and to pay jay $300 per month for the eight remaining months of the school year. a second student offered to move in the second semester and pay $2500 to jay. jay estimates his food cost per month is $500 if he lives in the dorm and $450 if he lives in an apartment with three other students. his share of the apartment rent and utilities will be $404 per month. assume each semester is 4.5 months long. disregard the small differences in the timing of the disbursements or receipts. what is the cost of the cheapest alternative?