Solara Company Entered into a Contract with Hammer Construction Company

Multiple Choice

Solara Company entered into a contract with Hammer Construction Company to construct a building.Construction began in 2014 and was completed in 2015.As of January 1,2015,Solara had made total progress payments to Hammer of $50,000.In addition,interest capitalized on the building during 2014 was $2,500.Solara made additional payments on June 30,2015,and December 31,2015.Solara had issued $80,000 of 9% bonds to finance part of the construction.The average interest on Solara's additional debt was 11% for 2015. How much interest should be capitalized by Solara for 2015?

A) $6,750
B) $6,975
C) $13,500
D) $13,725