Question

Messersmith Company is constructing a building. Construction began in 2017 and the building was completed 12/31/17. Messersmith made payments to the construction company of $3,000,000 on 7/1, $6,300,000 on 9/1, and $6,000,000 on 12/31. Weightedaverage accumulated expenditures were
a. $3,075,000.

b. $3,600,000.

c. $9,300,000.

d. $15,300,000.

Answer 1

Answer:

b. $3,600,000.

Explanation:

The weighted average accumulated expenditure is given by the sum of each expenditure weighted by the distance between payment and the conclusion of the construction:

$WAAE = \ 3,000,000\frac{12-6}{12}+ \ 6,300,000\frac{12-8}{12}+ \ 6,000,000\frac{12-12}{12} \\WAAE = \ 3,600,000$

Weighted average accumulated expenditures were $3,600,000.