Hilary Corp. contracted with a company to build a storage warehouse in Year 1. Construction began on April 1 at which time Hilary Corp. paid $65,000. Hilary Corp. then made additional payments as follows, based on progress made towards completion of the structure: June 1 September 1 $75,000 $90,000 December 1 $50,000 Hilary Corp. borrowed $95,000 on January 1 specifically for this project at 8% interest. Hilary had the following non-specific borrowings (i.e., general borrowings) outstanding during the year: $2.5 million loan 7.5% $ $ 500,000 loan 15% a. How much interest should be capitalized on this building? b. What is the amount of interest expense that will appear on Hilary's Year 1 income statement?