Question

Wildhorse Company is constructing a building. Construction began on February 1 and was completed on December 31. Expenditures were $2,088,000 on March 1, $1,236,000 on June 1, and $3,060,460 on December 31. Compute Wildhorse’s weighted-average accumulated expenditures for interest capitalization purposes.

Answer 1

Answer:

$2,461,000

Explanation:

On March 1,

weighted-average accumulated expenditures:

= Expenditure × Capitalization period

= $2,088,000 × (10 months ÷ 12 months)

= $1,740,000

On June 1,

weighted-average accumulated expenditures:

= Expenditure × Capitalization period

= $1,236,000 × (7 months ÷ 12 months)

= $721,000

On December 31,

weighted-average accumulated expenditures:

= Expenditure × Capitalization period

= $3,060,460 × (0 months)

= $0

Total weighted-average accumulated expenditures:

= On March 1 + On June 1 + On December 31

= $1,740,000 +  $721,000 + $0

= $2,461,000