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

question 34

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 2018, 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 answer choices are correct.

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Definitions:

Journal Entries

The basic way to record financial transactions in double-entry bookkeeping, involving debits and credits in accounting records.

Dividends

Disbursements issued by a company to its shareholders, typically originating from the firm's earnings.

Fair Value Through Profit or Loss

An accounting approach where financial assets are recorded at their fair value, with changes affecting the profit or loss statement directly.

Market Value

The current price at which an asset can be bought or sold in a public market.