Interest Capitalization

On January 1, 2020, Graham Company purchased land for an office site by paying $600,000 cash. Graham began construction on the office building on January 1, 2020. The building was completed on December 31, 2020. The following expenditures were incurred for construction

Date Expenditures

January 1, 2020 $2,000,000

June 1, 2020 2,600,000

September 1, 2020 2,800,000

December 31, 2020 1,200,000

To help pay for construction, $2,000,000 was borrowed on January 1, 2020, on a 9%, 5-year note payable.

In addition to the construction note, the following were outstanding for all of 2020:

$3,000,000, 12%, 6-year note payable

$5,000,000 6% 10-year bonds payable

Instructions: Determine the (1) avoidable interest, (2) actual interest, and (3) interest to be capitalized.

(Please show work)