Question

In early January 2020, Southland Growers began construction of a new, fully automated citrus processing plant. The plant was finished and ready for use on September 30 of the following year. Southland’s total expenditures for construction of the facility were as follows: To finance construction of the facility, Southland took out a $2,200,000, 12% loan on January 2, 2020. This loan was outstanding for the duration of the construction period. The firm also had $8,000,000 in 9% bonds outstanding in both 2020 and 2021. Given these figures, Southland’s weighted-average accumulated expenditures for 2020 were

Answer 1

Answer:

The weighted average accumulated expenditures for 2020 were;

$10,200,000

Explanation:

To determine the accumulated expenditures for 2020, follow the steps below;

Step 1: Determine outstanding loans in 2020

Expense

Since the first loan taken was taken on January 2,2020, the its weighted average will be the outstanding loan for that year multiplied by the number of months when the loan was used over number of months in a year. This can be expressed as;

Loan outstanding=$2,200,000×12/12=$2,200,000

For the bonds, we have been given the outstanding balance for 2020 already as shown;

Bonds outstanding in 2020=$8,000,000

Step 2: Determine the weighted-average accumulated expenditures in 2020

Average accumulated=January 2,2020 Loan outstanding+Bonds outstanding in 2020

replacing;

Average accumulated=(2,200,000+8,000,000)=$10,200,000

Average accumulated=$10,200,000

The weighted average accumulated expenditures for 2020 were;

$10,200,000