On January 2, 2011, the Highlands Company began construction on a new manufacturing facility for its own use. The building was completed in 2012. The company borrowed $1,500,000 at 8% on January 1 to help finance the construction. In addition to the construction loan, Highlands had the following debt outstanding throughout 2011:

$5,000,000, 12% bonds

$3,000,000, 8% long-term note

Construction expenditures incurred during 2011 were as follows:

January 1 $ 600,000

March 31 1,200,000

June 30 800,000

September 30 600,000

December 31 400,000

Assume that the company has no other interest-bearing debts, the amount of interest expense that will appear in the 2011 income statement is

A. $177,750.

B. $840,000.

C. $960,000.

D. $782,250.