Business, 31.12.2019 01:31 babysitterwick

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):

july 1, 2017

54

october 1, 2017

22

february 1, 2018

30

april 1, 2018

21

september 1, 2018

20

october 1, 2018

6

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)?

this is the solution for this question:

the correct answer is: [from 2018 ? ($77.95 million × 10/10) + ($30 million × 9/10) + ($21 million × 7/10) + ($20 million × 2/10) + ($6 million × 1/10) = $124.25 million.

of the average accumulated expenditures ($124.25 million), $70 million was financed at 6% for 10 months in 2018, 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).

i want to ask you where $77.95 come from in this solution.

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On june 1, 2017, the crocus company began construction of a new manufacturing plant. the plant was c...