Thurstone Company, a U.S.-based company, borrows 1,500,000 British pounds (£) on January 1, Year 1, at an interest rate of 4 percent to finance the construction of a new office building for its employees in England. Construction is expected to take six months and cost £1,500,000. Thurstone temporarily invests the British pounds borrowed until cash is needed to pay costs. Interest earned in the first quarter of Year 1 is £5,000. During the first quarter of Year 1, expenditures of £500,000 are incurred; the weighted-average expenditures are £300,000. Thurstone will repay the borrowing plus interest on June 30, Year 1, by converting U.S. dollars into British pounds. The U.S. dollar/British pound exchange rate was $2.00 on January 1, Year 1, and $2.10 on March 31, Year 1. The change in exchange rate is the result of the difference in interest rates in the United States and Great Britain.
Required:
Determine the amount of borrowing costs (in U.S. dollars) that Thurstone should include in the cost of the new office building at March 31, Year 1.