Reference no: EM133977

Question :

1. On 1^st July, 2012, the Crocus Company started construction of a new manufacturing plant. The plant was completed on 31^st October, 2013. Expenditures on the project were as given ($ in millions):

July 1, 2012            54

October 1,2012     22

February 1, 2013   30

April 1, 2013           21

September 1, 2013 20

October 1, 2013        6

On 1^st July, 2012, Crocus obtained a $70 million construction loan with a 6% interest rate. The loan was outstanding throughout the end of October, 2013. The company's only other interest-bearing debt was a long-term note for $100 million with an interest rate of 8 percent. This note was outstanding through all of 2012 and 2013. The company's fiscal year-end is December 31.

2. Evaluate the amount of interest that Crocus should capitalize in 2012, using the particular interest method?

$1.90 million.

$1.95 million.

$2.96 million.

None of the above is correct.

3. In evaluating the capitalized interest for 2013, Crocus' average accumulated expenditures are:

$46.30 million.

$103.54 million.

$122.30 million.

$124.25 million.

4. What is the amount of interest that Crocus could capitalize in 2013, using the particular interest method (rounded to the nearest thousand dollars)?

$7,248,000 (rounded).

$7,283,000 (rounded).

$8,740,000 (rounded).

None of the above is correct.