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

question 115

Multiple Choice

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.