I:8-42 Classification of Interest Expense. On January 1 of the current year, Scott borrows

$80,000, pledging the assets of his business as collateral. He immediately deposits the money in an interest-bearing checking account. Scott already had $20,000 in this account.

On April 1, Scott invests $75,000 in a limited real estate partnership. On July 1, he buys a new ski boat for $12,000. On August 1, he makes a $10,000 capital contribution to his unincorporated business. Scott repays $50,000 of the loan on November 30 of the current year. Classify Scott’s interest expense for the year.