What Is the Amount of Interest That Crocus Should Capitalize

question 63

Multiple Choice

What is the amount of interest that Crocus should capitalize in 2009, using the specific interest method (rounded to the nearest thousand dollars) ?

• A)$7,248,000 (rounded)
• B)$7,283,000 (rounded)
• C)$8,740,000 (rounded)
• D)None of these is correct.Of the average accumulated expenditures ($124.25 million from question 100), $70 million was financed at 6% for 10 months in 2009, and the remainder of $54.25 million was financed at 8% for that period.The total interest cost was: ($70 million .06 10/12) + ($54.25 million .08 10/12) = $7, 117,000 (rounded)

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Definitions:

Management Decision-Making

The process by which management identifies, evaluates, and chooses among alternative courses of action to achieve organizational objectives.

Traditional Income Statement

An income statement format that separates costs into categories of cost of goods sold and operating expenses to calculate net income.

Mixed Costs

Costs that have both a fixed and variable component, changing with the level of output but not directly proportional to it.

CVP Analysis

Cost-Volume-Profit Analysis is a technique in managerial accounting that examines the impact of cost and volume changes on a company’s operating and net income.