On January 1, Year 1, Bluebird Inc. borrowed $ 10 million at a rate of 9% for

Question:

On January 1, Year 1, Bluebird Inc. borrowed $ 10 million at a rate of 9% for five years and began construction of its new regional office building. Bluebird has no other debt. During Year 1, Bluebird’s weighted average accumulated construction expenditures totaled $ 3,750,000. What should Bluebird report as interest expense on its income statement for Year 1?
a. $ 337,500
b. $ 500,000
c. $ 562,500
d. $ 900,000