11. On 6/1/17, ZZZ Company contracted to a have a new building constructed for $4,000,000. ZZZ made the following payments to the contractor:

• 7/30/17$900,000
• 1/30/18$1,500,000
• 5/30/18$1,600,000
• Total $4,000,000

Construction was completed and the building was ready for occupancy on 5/31/18.

ZZZ did not obtain a construction loan, but did have the following loans outstanding during the construction period:

• $2,000,00010%, 5-years, dated 4/1/14, with interest payments due annually on 4/1
• $3,000,00012%, 10-years, issued 6/30/10, with interest payments due annually on 6/30

The construction of the building qualifies for interest capitalization. Management determined that the effect of capitalizing the interest on the new building, compared to the effect of expensing the interest, is material.

Management calculated the weighted-average accumulated expenditures on the new building during the capitalization period in the amount of $1,250,000.

• Calculate the avoidable interest.
• Show your calculation in detail.