Assume the following long-term debt structure for Parton Stores: Construction Loan at 5% on Building Under Construction . . . . . . . ..$2,000,000 Other Borrowings at 6% Average Rate . . . . . . . . . . . . . . . . . . . . . . . . .7,200,000 Total Long-Term Debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $9,200,000 The account Building Under Construction has an
average balance during the year of $6,000,000 . Parton Stores bases the amount of interest capitalized on the new construction-related borrowing, $2,000,000, and enough of the other borrowing to bring the total to $6,000,000 . How much does Parton Stores capitalize interest on the new construction?
a. $240,000
b. $300,000
c. $320,000
d. $340,000
e. $360,000
D
[(5% x 2,000,000) + (6% x 4,000,000)]
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