On June 1, 2017, the Crocus Company began construction of a new manufacturing plant. The plant was completed on October 31, 2018. Expenditures on the project were as follows ($ in millions): $\begin{array}{|l|r|}
\hline \text { July } 1,2017 & 54 \
\hline \text { October } 1,2017 & 22 \
\hline \text { February } 1,2018 & 30 \
\hline \text { April } 1,2018 & 21 \
\hline \text { September } 1,2018 & 20 \
\hline \text { October } 1,2018 & 6 \
\hline
\end{array}$ On July 1, 2017, Crocus obtained a $70 million construction loan with a 6% interest rate. The loan was outstanding through the end of October, 2018. The company's only other interest-bearing debt was a long-term note for $100 million with an interest rate of 8%. This note was outstanding during all of 2017 and 2018. The company's fiscal year-end is December 31.
- What is the amount of interest that Crocus should capitalize in 2017, using the specific interest method?
A) $1.90 million.
B) $1.95 million.
C) $2.96 million.
D) None of these answer choices are correct.

Question

Quizplus · Accepted Answer

Average expenditures for 2017: ($54 million × 6/6) + ($22 million × 3/6) = $65 million. The interest is: $65 million × .06 × 6/12 = $1.95 million.

On June 1, 2017, the Crocus Company Began Construction of a New