Assume the Following Long-Term Debt Structure for Parton Stores

question 5

Multiple Choice

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

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