On January 1, 20X0 Spencer Heavy Lifting Entity (SHLE) Borrows

On January 1, 20X0 Spencer Heavy Lifting Entity (SHLE) borrows $2,000,000 to build a new qualifying asset. The terms of the agreement are that the entire loan amount will be paid exactly one year from the borrowing date. Additionally, the borrowed funds include a 10 percent interest payment at the time of repayment. Forty percent of the borrowed funds were used for the factory. All funds were initially borrowed specifically for this project. The firm has no other outstanding borrowings. Ignore time value of money. What amount of the borrowing cost should be capitalized?

A) $800,000
B) $2,000,000
C) $880,000
D) $2,200,000
E) $80,000
F) $200,000