What is the amount of interest that Crocus should capitalize in 2012, using the specific interest method?

Question

Quizplus · Accepted Answer

The specific interest method capitalizes interest by applying a weighted average interest rate to the specific asset or group of assets being constructed. In this case, Crocus constructed two major assets: mine and mill. The weighted average interest rate is calculated as (interest expense for mine ÷ total expenditures for mine) × (total expenditures for mine and mill) + (interest expense for mill ÷ total expenditures for mill) × (total expenditures for mine and mill). Plugging in the numbers, we get: 
(30,600,000 ÷ 153,000,000) × 255,000,000 + (65,100,000 ÷ 255,000,000) × 255,000,000 = 19,224,836 + 65,100,000 = 84,324,836.
Therefore, the amount of interest that Crocus should capitalize in 2012 using the specific interest method is $84,324,836 - $82,375,000 = $1.95 million. 
The correct answer is B.

What Is the Amount of Interest That Crocus Should Capitalize